World economy ‘limping’ towards a soft landing as inflation eases, says IMF

The global economy is ‘limping along’ as countries struggle with high interest rates and easing but still intense inflation, the Inter­national Monetary Fund says.

International Monetary Fund chief economist Pierre Olivier Gourinchas says the global economy has navigated higher interest rates surprisingly well. Picture: AFP

The global economy is “limping along” as countries struggle with high interest rates and easing but still intense inflation, the Inter­national Monetary Fund says.

The IMF’s latest World Economic Outlook, unveiled during the organisation’s annual meetings held in Morocco, upgrades growth for Australia from 1.6 per cent to 1.8 per cent in 2023, versus its April forecasts, but slashed growth from 1.7 per cent to 1.2 per cent next year.

IMF chief economist Pierre-Olivier Gourinchas said the global economy had shown “remarkable resilience” in the wake of the pandemic, the Russian invasion of Ukraine, and the cost-of-living crunch. “Despite war-disrupted energy and food markets, and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled,” he said. “Even so, growth remains slow and uneven, with widening divergences. The global economy is limping along, not sprinting.”

Global growth will slow from 3.5 per cent in 2022 to 3 per cent this year, and then to 2.9 per cent in 2024 – a 0.1 percentage point downgrade from July.

“This remains well below the historical average,” the ­report says.

But there was good news as well, with fears of recession around the world receding.

“Projections are increasingly consistent with a soft-landing scenario, bringing inflation down without a major downturn in ­activity, especially in the United States,” the report says.

Treasurer Jim Chalmers said the IMF outlook “shows inflation is more persistent around the world and that means it will be more persistent here too”.