President Biden’s stalling $2 trillion stimulus push and China’s zero Covid policies will hamper the world economy’s pandemic fightback this year as inflation pressures escalate, the International Monetary Fund has warned.
The lender of last resort slashed its 2022 global growth forecast as it predicted that the US and China, the world’s two largest economies, will slow markedly in hefty downgrades.
Britain is expected to be the fastest-expanding G7 economy this year but world growth will slow from 5.9pc in 2021 to 4.4pc this year, down 0.5 percentage points from its October forecast.
The IMF warned inflationary pressures battering households will persist for longer than hoped with prices set to jump by an average of 3.9pc in advanced economies in 2022.
A big downgrade for the US economy was blamed on Mr Biden struggling to pass his $2 trillion “Build Back Better” spending package as Democrats scramble to pare back the plans to win support.
Its growth is expected to slow to 4pc in 2022, 1.2 percentage points lower than previously forecast, as the President fails to gain the backing of moderate Democrats, particularly Senator Joe Manchin.
Mr Biden hopes to revive the spending bill talks but faces an uphill battle given the Democrats’ slim majority in Congress.
Britain’s economic growth will also be weaker than previously forecast this year at 4.7pc, down from 7.2pc in 2021, as worker shortages and soaring energy prices bite.
However, the economy will enjoy a stronger-than-expected 2023 with growth of 2.3pc.
Gita Gopinath, deputy managing director of the IMF, warned the global recovery “faces multiple challenges” from supply problems, inflation and renewed Covid restrictions.
“Supply disruptions still weigh on activity and are contributing to higher inflation, adding to pressures from strong demand and elevated food and energy prices,” she said.
“In the case of the United States, this reflects lower prospects of legislating the Build Back Better fiscal package, an earlier withdrawal of extraordinary monetary accommodation, and continued supply disruptions.”
The Washington-based IMF predicted that China’s tough zero Covid response to outbreaks and property market woes sparked by the crisis at developer Evergrande will cause a sharp slowdown. Its growth is expected to decelerate from 8.1pc in 2021 to 4.8pc this year.
Germany, Europe’s largest economy, was also handed a big downgrade as it is more exposed to supply disruptions hampering manufacturers.
Its growth is set to pick up from 2.7pc in 2021 to 3.8pc this year but the acceleration will be much weaker than previously expected.