However, the IMF expects the global real GDP growth to continue its downturn through 2023 to reach 3.8 percent, which is 2 percent higher that October projections.

For the Middle East and Central Asia, the report expects the region’s growth to slightly increase to 4.3 percent in 2022, up from 4.2 percent in 2021, before dropping to 3.6 percent in 2023. The report did not include data about Egypt’s projections.

The scenario the IMF predicts involves mobility restrictions, border closures, and health impacts as a result of the spread of the Omicron variant, all of which would weigh on global growth in the first quarter (Q1) of 2022.

However, the report expects these impediments to ease starting Q2 of 2022, assuming that the global surge in Omicron infections abates and the virus does not mutate into new variants, adding that these forecasts are based on information up to 18 January 2022.

The report said the Omicron variant, elevated inflation, supply chain disruption, and the tightened monetary conditions are the main risks the world will experience during 2022.

On the inflation wave, the report expects it to persist for longer than anticipated in the October and to remain elevated over the near term, driven by the ongoing supply chain disruptions and high energy prices that are expected to continue in 2022.

Inflation is projected to average 3.9 percent in advanced economies and 5.9 percent in emerging markets and developing economies in 2022, before subsiding in 2023, according to the report.

“Assuming medium-term inflation expectations remain well anchored and the pandemic eases its grip, higher inflation should fade as supply chain disruptions ease, monetary policy tightens, and demand rebalances away from goods-intensive consumption towards services,” the report explained.

The report also expects the rapid rise in global fuel prices to slow down during 2022–2023, which will help contain headline inflation.

In this respect, the report points to the futures markets indication that oil prices will rise about 12 percent and natural gas prices about 58 percent in 2022, both considerably lower than the increases seen in 2021, before declining in 2023 as supply-demand imbalances ease further.

Moreover, the report predicts food prices will edge up at a more moderate pace of about 4.5 percent in 2022 and decline in 2023.

Touching upon the US Federal Reserve’s (Fed) anticipated tapering policy, the report noted that the US is witnessing a sharp decline in unemployment accompanied by buoyant nominal wage growth, which assumes a degree of tightening in US labor markets.

“If US labor force participation remains below pre-pandemic levels and discouraged workers remain on the sidelines, tighter labor markets may feed through to higher prices. As a result, the Fed communicated in December 2021 that it will taper asset purchases at a faster pace and signaled that the federal funds rate will likely be raised to between 0.75 percent and 1 percent by the end of 2022, some 50 basis points higher than in the previous guidance,” the report highlighted.

The report also expects global trade to recede in 2022 and 2023, in line with the overall pace of expansion.

Assuming that the pandemic eases over 2022, supply chain problems are expected to abate later in 2022, with a moderation in global goods demand would help reduce imbalances.

The report expects cross-border services trade, particularly tourism, to remain subdued.