By Scott Kanowsky
Investing.com -- The International Monetary Fund has lowered its forecast for global growth for 2023 and next year, flagging that the world's economy faces heavy uncertainty following recent turmoil in the banking industry.
In its April financial stability report unveiled on Tuesday, the fund said it expects worldwide growth this year to come in at 2.8%, down by 0.1 percentage point from its previous projection in January. In 2024, activity is seen increasing to 3.0%, although that outlook has also been downgraded by 0.1 percentage point.
Last month's stock markets volatility following the failure of regional U.S. lenders Silicon Valley Bank and Signature Bank, as well as the Swiss government-brokered takeover of Credit Suisse (SIX:CSGN) by larger rival UBS (SIX:UBSG), have exacerbated investor concerns over possible vulnerabilities in the financial services sector, the IMF noted.
These ructions also disrupted signs of stabilization in the global economy after the dual shocks of the COVID-19 pandemic and the outbreak of the war in Ukraine, it added.
"With the recent increase in financial market volatility and multiple indicators pointing in different directions, the fog around the world economic outlook has thickened," the IMF said in the report. "Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled."
The IMF argued that other factors, including the reopening of China's economy from strict health rules and aggressive central bank interest rate hikes aimed at corralling soaring inflation, will likely continue to play into the evolution of global economic activity throughout 2023.
A so-called "hard landing" - a marked slowdown off the back of a period of elevated growth - is now "a much larger risk" in advanced economies, the IMF warned.