On 10^th October 2023, the International Monetary Fund (IMF) released the World Economic Outlook. The overview states with the headline “Global recovery remains slow, with growing regional divergences and little margin for policy error”.

Global Growth to Slow Down

The WEO report states that Global Growth to slow down from 3.5 percent in 2022 to 3.0 percent in 2023 and 2-9 percent in 2024. The forecast for 2024 is down by 0.1 percent from July 2023, Update to the WEO of IMF. This is below the historical projections (2000-19) average of 3.8 percent.

Over the medium term, forecasts the global growth at 3.1 percent at their lowest in decades. The report also stated that the prospects for countries to catch up to higher living standards are weak.

Source: WEO Report, Ocotber, 2023, IMF

Advanced Economies

The growth of advanced economies is expected to slow down from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024. This is amid a stronger-than-expected US growth rate but weaker-than-expected growth in the Euro Area.

Emerging and Developing Economies

The WEO Report has projected that emerging markets and developing economies to have growth modestly decline from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024. This is a downward revision of 0.1 percentage point in 2024. The report also reflected the property sector crisis in China.

Source:  WEO Report, Ocotber, 2023, IMF

Inflation To Steadily Decline

The WEO Report forecasted that Global inflation to decline steadily from 8.7 percent in 2022 to 6.9 percent in 2023 and 5.8 percent in 2024. The forecasts for 2023 and 2024 are revised up by 0.1 percentage point and 0.6 percentage point respectively. The report stated that inflation is not expected to return to the target till 2025 in most cases.

The report stated that Risks to the outlook are more balanced than they were six months ago. This outlook is based on account of the resolution of the US debt ceiling tensions as well as decisive action taken by the US and Swiss authorities to contain financial turbulence. The balance of risks to global growth remains tilted to the downside. The report also states that China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters.

The report also states that there will spike in food and energy prices due to Political and Geopolitical shocks. The flow of commodities across the markets may be constrained due to intensifying geo-economics fragmentation, this may cause additional price volatility and complicate the green transition. Half of low-income developing countries are in or at high risk of debt distress.

The report also states that to mitigate financial stress Central banks should restore price stability with an effective monetary policy framework. Reforms to reduce structural impediments to growth will be more helpful in reducing debt and bringing inflation to the target. To avoid debt distress more efficient multilateral coordination is needed on Debt resolution.

Conclusion – My Perspective:

At a time when many economies are having or facing hard times, this WEO report is giving more hope for the economies that things are not as bad as all economies think. Though Growth and Inflation may decline in the coming days at what costs is the real question. However, one thing is clear from this report is things are not going to be smooth for many economies in the world till 2025.