Global economic forecasts – Rising regional divergances and limited policy room

The International Monetary Fund (IMF) offers most recent forecast for the global economy in its October World Economic Outlook. Over the next two years it expects:

• Global GDP growth will remain slow and uneven, falling from 3.5% in 2022 to 3.0% in 2023, then 2.9% in 2024. The forecast for 2024 is slightly down from the previous July outlook. Advanced economies have been hit harder by the downturn in the global economy.
• GDP growth in Australia is projected to slow to 1.8% in 2023 and 1.2% in 2024. This is well below Australia’s long-term growth rate, and will be the slowest two-year period since the recession of the early 1990s. Among other official forecasters, IMF forecast for Australia economic growth 2024 is the lowest at 1.2%.
• Global inflation is expected to decrease from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024. Inflation in advanced economies will fall to 3.3% in 2023 and 2.6% in 2024. The main drivers of this forecast would be tightening monetary policies around the world and lower international commodity prices.
• Australia’s headline inflation is projected to fall from 6.6% to 5.8% in 2023, and to 4.0% in 2024. Inflation, which is anticipated to have reached its maximum level in the latter half of 2022, is forecast to begin steadily declining in the following year, 2023, as supply chain and commodity pressures begin to subside.
• Despite the resilient performance of global economy in the early 2023, s factors like war in Ukraine, geoeconomic fragmentation, the necessary monetary policy tightening, and severe weather events are holding back the global economy. It is crucial to balance the price stability while relieving the potential financial stress as there is a limited margin of error for the policy makers.

Read the IMF’s Economic Outlook Interim Report for October 2023