Why IMF expects Australian economy to grow at 4.2% in 2022

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Why IMF expects Australian economy to grow at 4.2% in 2022

IMF April global growth forecast
Image source: © Jojojojo | Megapixl.com

Highlights

  • Recent forecasts state that recovery would take a backseat in 2022 because of war, and global economy would experience a slowdown.
  • According to the IMF, Australia has the upper hand in 2022 as the commodity boom protects Australia from the global slowdown.
  • The IMF also supports RBA’s decision to increase the interest rate to combat high inflation.

The International Monetary Fund (IMF) recently released its economic forecast for 2022. The rest of 2022 looks grim following the pandemic inflicted supply chain woes and the Russia-Ukraine conflict. The interconnectedness of global trade is now taking a heavy toll on most economies. Let’s have a look at what IMF has forecasted.

IMF’s World Economic Outlook, April 2022: War Sets Back Global Recovery

After a global growth of 6.1% in 2021, the International Monetary Fund (IMF) was hopeful for the world economy to dive deeper into the recovery phase. Thus, the forecast released by IMF in January showcased better recovery prospects than the recent April report.

The Russian invasion has caused significant supply chain disruptions across the world economy. Fuel and food prices have been skyrocketing, adversely affecting the vulnerable sections of the developing and underdeveloped nations.

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The recent forecast states that the recovery would take a backseat in 2022 because of the war, and the global economy would experience a slowdown. According to the report, the global growth rate would be 3.6% in 2022 and 2023.

Additionally, the global inflation in 2022 would be around 5.7% in advanced economies and about 8.7% in emerging economies. These projections are 1.8 and 2.8% higher than the January forecasts.

Australian economy to grow in 2022

Source: © Cammeraydave | Megapixl.com

However, the IMF has projected that Australia’s graph might take a smoother road. Despite high inflation in the country, IMF has forecasted Australia to grow at 4.2% in 2022. Let’s see why?

IMF has showcased that Australia would grow at a rate of 4.2% in 2022 with an inflation rate of 3.9%. Time will prove if this happens, especially when the country is dealing with skyrocketing prices, falling consumer confidence, and big banks' predictions of an increase in interest rates.

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So, what’s behind these IMF projections?

According to the IMF, Australia has the upper hand in 2022 as the commodity boom protects Australia from the global slowdown. The country is a net commodity exporter; thus, the higher commodity prices such as gas, iron ore, coal, and wheat benefit Australia.

The IMF also supports RBA's decision to increase the interest rates to combat high inflation. Skyrocketing prices may hamper the Australian economy in the coming months; thus, it is essential to tighten the country's monetary policy.

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The humanitarian crisis in Ukraine is disrupting the entire global economy in multilateral ways. Thus, it is essential to take effective and immediate monetary measures to prevent further economic distress and maintain global liquidity.

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