The International Monetary Fund is projecting that global growth will bottom out at 2.8% in 2023 before rising modestly to 3.0% in 2024.

In its April 2023 World Economic Outlook (WEO) Report, global inflation will decrease, although more slowly than initially anticipated, from 8.7% in 2022 to 7.0% 2023 and 4.9%in 2024.

Notably, it said, emerging market and developing economies are already powering ahead in many cases, with growth rates (fourth quarter over fourth quarter) jumping from 2.8% in 2022 to 4.5% this year.

“The slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom, where growth (also fourth quarter over fourth quarter) is expected to fall to 0.7% and –0.4%, respectively, this year before rebounding to 1.8% and 2.0% in 2024”.

Furthermore, it said the global economy is yet again at a highly uncertain moment, with the cumulative effects of the past three years of adverse shocks—most notably, the COVID-19 pandemic and Russia’s invasion of Ukraine—manifesting in unforeseen ways.

Spurred by pent-up demand, lingering supply disruptions, and commodity price spikes, inflation reached multi-decade highs last year in many economies, leading central banks to tighten aggressively to bring it back toward their targets and keep inflation expectations anchored.

Growth projected to decline by half in advanced economies

For advanced economies, the report said, growth is projected to decline by half in 2023 to 1.3%, before rising to 1.4% in 2024.

Although the forecast for 2023 is modestly higher (by 0.1 percentage point) than in the January 2023 WEO Update, it is well below the 2.6% forecast of January 2022.

About 90%of advanced economies are projected to see a decline in growth in 2023. With the sharp slowdown, advanced economies are expected to see higher unemployment: a rise of 0.5 percentage point on average from 2022 to 2024.

Economic prospects stronger in emerging economies

For emerging market and developing economies, the report also said economic prospects are on average stronger than for advanced economies, but these prospects vary more widely across regions. On average, growth is expected to be 3.9% in 2023 and to rise to 4.2% in 2024.

The forecast for 2023 is modestly lower (by 0.1 percentage point) than in the January 2023 WEO Update and significantly below the 4.7% forecast of January 2022.

In low-income developing countries, GDP is expected to grow by 5.1%, on average, over 2023–24, but projected per capita income growth averages only 2.8% during 2023–24, below the average forecast.

Inflation declines with rapid rate rises

The report also said global headline inflation has been declining since mid-2022 at a three-month seasonally adjusted annualised rate.

It added a fall in fuel and energy commodity prices, particularly for the United States, euro area, and Latin America, has contributed to this decline.

“To dampen demand and reduce underlying (core) inflation, the lion’s share of central banks around the world have been raising interest rates since 2021, both at a faster pace and in a more synchronous manner than in the previous global monetary tightening episode just before the global financial crisis”.

Headline inflation is running at nearly 7% (year over year) in the euro area—with some member states seeing rates near 15%—and above 10% in the United Kingdom, leaving household budgets stretched.