If economists were engaged on the success of their forecasts, they would fill the queues of the world’s soup kitchens. The agencies – domestic and international alike – that employ them would be a laughing stock, with their leadership routinely imprisoned or at least, sent to early retirement. Fortunately, given forecasts are nearly always wrong, it is relatively well understood their value lies in the trend rather than trying to pick exact outcomes and turning points. Lucky for those economists and agencies with which they work! Dangerous stuff, this economics business.
Twice a year, one of those global agencies, the International Monetary Fund (IMF) extends itself and publishes its World Economic Outlook report. This provides insights by region and country into the economic state of play, both current, and… forecast.
Right now, the biggest challenge being confronted by the IMF is what happens with inflation, both globally and domestically (discussed elsewhere in this edition of Statistics Count) because inflation is the driver of interest rate movements, which in turn directly impacts growth.
For Australia, the IMF is now expecting a weaker outlook for 2024, with GDP at 1.24%. This is down on the October 2022 forecast, that indicated growth in 2024 would be 1.7%.
The 1.7% was not a good number, and the reality is that 1.2% is terrible, in any context.
More to the point, the IMF is suggesting this lower than trend growth will not exceed 2.3% until 2028. This compares to historic median annual GDP growth of 2.9% from the end of the 1990s recession, to the year before COVID 19 shut the economy down.
Looking at the global economy, it is interesting to note that while we pin great hope on the emerging Indian economy, the reality is the US and China are expected to drive global growth through to 2028.
The scale of these two economies leaves the other members of the Big 5 well behind. A timely reminder of why the Australian Prime Minister’s state visits to the USA and China are so important not just in terms of national security, but also economic opportunities.
