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The International Monetary Fund has added a dose of optimism to oil markets by revising its global economic growth outlook to reflect a lowered risk of a slowdown.
In its latest monthly World Economic Outlook, the lender said that it expected inflation to peak and the global economy to grow by 2.9% this year. While this would be a decline from a growth rate of 3.4% estimated for 2022, it is an upward revision from last month’s growth projection of 2.7%.
It also said that oil prices are set to be lower both this year and next than in 2022, a prediction based on the forecast of lower economic growth in both years.
The IMF based its revision on what it said was surprising resilience in consumer spending, notably in Europe and the United States, and lower energy costs. The reopening of China after last year’s Covid lockdowns was another factor cited in the revised outlook.
Inflation, according to the IMF would decline from 8.8% last year to 6.6% this year, and further to 4.3% in 2024. This would still leave it higher than the pre-pandemic global average of 3.5%, the Fund noted.
Although risks for global economic growth have moderated, the IMF said they are far from non-existent and went on to cite a surge in Covid infections in China, an escalation of the war in Ukraine, and higher financing costs among these risks.
Oil prices slipped following the publication of the update, weighed down by expectations of more rate hikes due to be announced this week and by resilient Russian oil exports.
The IMF’s report, although predicting lower oil prices, might have an invigorating effect on them because of the optimistic growth note it struck, even if it featured a prediction for lower oil prices this year and next.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.