The global economy has a better chance of dodging a hard landing, based on fresh International Monetary Fund forecasts, though advanced economies like Australia can still expect a stretch of subdued growth.
The agency says the likelihood of a soft landing, where inflation is wrangled under control without a major downturn in activity, has improved.
World economic growth is tipped to slow to three per cent this year and 2.9 per cent in 2024, which is a modest 0.1 percentage point downgrade from the agency’s July predictions.
Australia is expected to chart a similar pattern to other advanced economies and record a few years of weak activity.
The IMF has Australia’s real GDP growing 1.8 per cent in 2023 and 1.2 per cent in 2024.
IMF director of research Pierre-Olivier Gourinchas said the global economy had displayed “remarkable resilience” as it recovered from the pandemic, the conflict in Ukraine and an inflation surge.
“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.”
Inflation is starting to weaken around the world but most countries, Australia included, aren’t expected to have it back within target until 2025.
Treasurer Jim Chalmers said inflation was proving more persistent around the world.
“That means it will be more persistent here too,” he said.
“This is exactly why our primary focus is rolling out billions of dollars in cost-of-living help in ways that take some of the edge off inflation, not make it worse.”
The IMF also flagged several risks to its outlook, including the possibility of China’s property crisis deepening.
Financial stability concerns linger and countries have also run down their fiscal buffers, making them vulnerable to crises.
The changing climate and geopolitical shocks could also push up commodity prices and throw inflation off its downward course.
Poppy Johnston
(Australian Associated Press)
