Global growth is managing to withstand the headwinds of inflation and the war in Ukraine, even though it has barely recovered from the shock of Covid-19. Admittedly, its growth rate is below its historical average and its pre-pandemic level, with a rise of 3% in 2023, then 2.9% in 2024, according to estimates published on Tuesday, October 10, by the International Monetary Fund (IMF).

These forecasts, virtually unchanged from July's edition, prompted IMF chief economist Pierre-Olivier Gourinchas to say that the world economy is "limping along," but showing "remarkable" resilience.

This global average masks major disparities. Developing countries see their growth holding steady at 4% in 2023, while it plummets to 1.5% in wealthy countries. Even within these two major groups, the gaps are widening. The United States is buoyed by sustained growth, revised upward in 2023 (2.1%), while that of the Eurozone has slowed to 0.7%. Among the emerging market economies, China's economy, slowed by a decline in global demand and a real estate crisis, has been overtaken by Brazil and India, which are leading the way.

Inflation, which rose to 9.5% in the third quarter of 2022, is expected to fall back to 5.9% in the final quarter of 2023. This decline is slower than expected. The IMF has calculated that in 2023 price rises will exceed the targets set by almost all the world's central banks. In poor countries, a lull is not expected before 2024, while there is significant slowdown in the eurozone, dropping from 9.9% to 3.3% in one year in the last quarter of 2023.

"Although monetary tightening is beginning to bear fruit, the main cause of the slowdown in inflation is the fall in commodity prices," noted the IMF. Despite historically low unemployment rates in wealthy countries, the IMF also noted that there were no signs of an inflationary spiral fuelled by rising wages. "The tightening of monetary policies must continue until inflation is sustainably brought back towards its targets," warned Gourinchas, adding, "We're not there yet."

In the long term, the IMF is concerned about the fragmentation of the global economy. Border restrictions could make commodity markets even more volatile, slowing growth. Geopolitical uncertainties, combined with rising interest rates and falling public spending, are making companies cautious. Investment has not yet returned to pre-pandemic levels. Lastly, Gourinchas noted that governments' budgetary room for maneuver has shrunk and urges them to "reconstitute it to better prepare for future shocks."