Christmas is weeks away, but the International Monetary Fund (IMF) is playing the role of the Grinch.  

In its latest report, prepared for the Group of Twenty (G20), the Washington-based lender says the outlook for the global economy has soured in the weeks since its World Economic Outlook was published in October.  

In October, the fund kept its projection for global growth unchanged at 3.2% but cut its 2023 forecast to 2.7% from 2.9%.  

“More than a third of the global economy will contract this year or next, while the three largest economies — the United States, the European Union, and China — will continue to stall … the worst is yet to come, and for many people, 2023 will feel like a recession,” it said.  

Fast-forward a few weeks and it seems that things have indeed been worsening.  

“Recent high-frequency indicators confirm that the outlook is gloomier,” the IMF said in its latest Chart of the Week segment.  

The chart is drawn from purchasing managers’ indices (PMIs) from the G20, which includes South Africa. Such indices are a key barometer of manufacturing and services activity as purchasing managers buy the stuff that keeps things running.  

“There has been a steady worsening in recent months for purchasing manager indices that are tracking a range of G20 economies,” the IMF said. “Readings for a growing share of G20 countries have fallen from expansionary territory earlier this year to levels that signal contraction. That is true for both advanced and emerging market economies, underscoring the slowdown’s global nature. 

“While gross domestic product releases for the third quarter surprised on the upside in some major economies, October PMI releases point to weakness in the fourth quarter, particularly in Europe. 

“In China, intermittent pandemic lockdowns and the struggling real estate sector are contributing to a slowdown that can be seen not only in PMI data but also in investment, industrial production and retail sales. This will inevitably have a significant impact on other economies due to China’s large role in trade.”  

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In South Africa, the Absa Purchasing Managers’ Index rose to 50 in October from 48.2 in September, smack in the middle of the range, which is neither a signal of expansion nor contraction.  

But deteriorating PMI reads across the G20 bode ill for South Africa, as global headwinds will send a chill through it.  

The Treasury’s growth forecast for 2022 is 1.9% — the IMF’s is 2.1% — and the economy will almost certainly expand by less than that when all is said and done. The economy surprised on the upside in the first quarter (Q1) when it grew by 1.9%, bringing output briefly back to pre-pandemic levels. But it contracted by 0.7% in Q2 and it remains to be seen if a recession was dodged in Q3.  

And given all the domestic challenges — rolling blackouts, rising rates and political uncertainty as the ANC’s elective conference looms, to name but a few — things just got gloomier as the global economy slips deeper into a rut.  

“Global economic growth prospects are confronting a unique mix of headwinds, including from Russia’s invasion of Ukraine, interest rate increases to contain inflation, and lingering pandemic effects such as China’s lockdowns and disruptions in supply chains,” the IMF said.  

As the IMF warned in October, the worst indeed is yet to come. DM/BM