IMF Growth Outlook Drops, Foresees Feeble Economy

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The International Monetary Fund (IMF) was forced to downgrade its forecasts for the Australian economy. And according to Treasurer Jim Chalmers, this is a strong indicator that the global economy may expect a hard landing.

The IMF published its World Economic Outlook report just recently, where it foresees that the global output is down by 3.4% from last year. The report also shows that its growth outlook for Australia was slashed to 2.8%.

The report stated, “Tentative signs in early 2023 that the world economy could achieve a soft landing with inflation coming down and growth steady, have receded amid stubbornly high inflation and recent financial sector turmoil.”

The report also stated that unemployment and inflation rates were revised to show higher values. Australia’s inflation rate may surpass the Reserve Bank of Australia’s (RBA) target of 2-3% for the next two years.

Even though the treasurer believes this is a strong indicator of a hard landing, Chalmers believes Australia may be able to avoid a recession. He added that he and the RBA expect slow economic growth, but “We are better placed than most countries because of lower unemployment, because of the prices we’re getting for our exports and some of the other advantages we have.”

The IMF report predicts that the Australian GDP growth will slow to 1.6% this year and then may experience a lift of 1.7% the following year. Furthermore, it expects inflation to decrease to 5.3% this year and further decrease to 3.2% the following year.

The report recommends that the member countries should ‘tighten their belts’ to alleviate the economic pressure experienced by their central banks due to persistent inflation increases. The IMF further adds that reduced government spending may be helpful in conjunction with tax hikes.

Treasurer Chalmers also noted that the government is working hard to renew its trading relations with China in conjunction with the ongoing Australia-India Economic Cooperation and Trade Agreement (ECTA). Chalmers believes that these two activities also help alleviate the tax hike pressures.

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