‘Tough year ahead’: Gita Gopinath on IMF outlook for 2023

Gita Gopinath, Economic Counsellor and Director of the Research Department at the International Monetary Fund (IMF). File
| Photo Credit: Reuters

Describing the International Monetary Fund’s (IMF) outlook for 2023, Gita Gopinath, Deputy Managing Director of the IMF said, “We have a tough year ahead, but there are signs of resilience.”

She tweeted a video from Davos, where she is attending the World Economic Forum Annual Meeting 2023. Rising inflation, the fallout from the Russia-Ukraine war, as well as the COVID-19 pandemic, would make 2023 a tough year, she said in the video message. However, a strong labour market in several countries, including the U.S., and consumption holding up in several parts of the world indicated resilience.

“A tough year, because we have high levels of inflation around the world, even though it’s been coming down the last few months. Tough year because we still have the war and its spill-overs to the rest of the world,” Ms. Gopinath said.

“There are signs of resilience with strong labour market in several countries, including U.S. and Europe. We’re seeing consumption holding up in several parts of the world. We expect global growth to bottom out this year, but improve towards the second half of this year and into 2024,” she added.

‘Even if inflation comes down, prices are high’

Speaking at a panel discussion during the World Economic Forum Annual Meeting 2023, Ms. Gopinath said, “We do believe that, in terms of headline inflation for the global economy, we think it peaked in 2022.”

However, she warned, “Even if inflation comes down, prices are high because we don’t have deflation, we have lower levels of inflation. The prices have gone up. How much of an impact that has had on households and on consumption varies across countries.”

In closing, IMF’s Ms. Gopinath cautioned that any meaningful moves to bring down inflation will likely mean rising unemployment.

“We are at record low unemployment rates in the U.S. and euro area. Everything we know about our monetary policy when you tighten interest rates is for the unemployment rate to go up.” “That is how you bring down inflation,” she added.

(With PTI inputs)