## Navigating Global Divergences

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**Canonical URL:** [Navigating Global Divergences](https://www.imf.org/-/media/files/oap/oap-home/2023/october-2023-weo-ch1.pdf)

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### Overview
- Global economy: "Resilient but Losing Momentum."
- Main forces:
  - Headwinds ahead: Slowing growth in China; Monetary policy biting; Debt high, fiscal buffers limited.
  - Upside: Underlying inflation falling faster than expected; Faster recovery of domestic demand.
  - Downside: China property downturn intensifies; "Higher for longer" leading to financial market repricing; Increase in commodity prices; Debt distress; More geoeconomic fragmentation.
- World real GDP growth and world inflation are tracked (percent; y/y), showing easing inflation but slowing growth.

*Source: World Economic Outlook, October 2023 — IMF*

### Scarring: Growing Global Divergences
- Scarring from 2020–22 shocks measured as percent deviations in 2023 from prepandemic projections:
  - Scarring presented for GDP and for Domestic Demand (percent; deviation in 2023 from prepandemic forecasts).
- Permanent scarring expected, contributing to growing divergences across countries and regions.

*Source: World Economic Outlook, October 2023 — IMF*

### Inflation: Nearer but Not Quite There Yet
- Headline Inflation Has Halved (Percent, three-month moving average; SAAR).
- Core Inflation Has Declined More Gradually (Percent, three-month moving average; SAAR).
- Headline inflation to fall in 3/4 of countries in 2023.
- Core inflation: Down but sticky.

*Source: World Economic Outlook, October 2023 — IMF*

### Labor Market: Still Tight but Easing Signs
- Little evidence of a wage-price spiral (Percentage points deviations from t=0).
- High level of vacancies points to tightness (Change in vacancy-to-unemployment ratios relative to 2019:Q4).
- Labor market indicators show continued tightness with early signs of easing.

*Source: World Economic Outlook, October 2023 — IMF*

### Assumptions for the Baseline Forecast
- Monetary policy: "higher for longer."
- Fiscal stance: Government support shifts to fiscal consolidation in 2024.
- Policy Rates in Selected AEs shown (Percent; annualized; dashed lines are April 2023 WEO vintage).
- Fiscal Stance, 2021–24 shown as Change in structural primary fiscal balance, percent of potential GDP.

*Source: World Economic Outlook, October 2023 — IMF*

### Growth Projections: Advanced Economies (percent change from a year earlier)
- World / Advanced Economies / U.S. / Euro Area / Japan / U.K. / Canada / Other Advanced Asia — selected values:
  - 2022: 3.5 2.6 2.1 3.3 1.0 4.1 3.4 2.5
  - Revision from Jul. 2023: 0.0 -0.1 0.0 -0.2 0.0 0.0 0.0 0.0
  - 2023: 3.0 1.5 2.1 0.7 2.0 0.5 1.3 1.5
  - Revision from Jul. 2023: 0.0 0.0 0.3 -0.2 0.6 0.1 -0.4 -0.3
  - 2024: 2.9 1.4 1.5 1.2 1.0 0.6 1.6 2.2
  - Revision from Jul. 2023: -0.1 0.0 0.5 -0.3 0.0 -0.4 0.2 0.0
- Source label: IMF, October 2023 World Economic Outlook.

*Source: World Economic Outlook, October 2023 — IMF*

### Growth Projections: Emerging Markets and LIDCs (percent change from a year earlier)
- World / Emerging Market and Developing Economies / China / India / Brazil / Russia / Commodity Exporting Economies / Low Income Developing Countries — selected values:
  - 2022: 3.5 4.1 3.0 7.2 2.9 -2.1 3.7 5.2
  - Revision from Jul. 2023: 0.0 0.1 0.0 0.0 0.0 0.0 0.1 0.2
  - 2023: 3.0 4.0 5.0 6.3 3.1 2.2 2.7 4.0
  - Revision from Jul. 2023: 0.0 0.0 -0.2 0.2 1.0 0.7 0.0 -0.5
  - 2024: 2.9 4.0 4.2 6.3 1.5 1.1 3.0 5.1
  - Revision from Jul. 2023: -0.1 -0.1 -0.3 0.0 0.3 -0.2 0.1 -0.1
- Source label: IMF, October 2023 World Economic Outlook.

*Source: World Economic Outlook, October 2023 — IMF*

### Global Outlook: Too Weak for Comfort
- Global growth described as "Stable and slow."
- Long-term global growth projections expressed in Trillions of US dollars in 2023 prices.
- Five–Year–Ahead growth projections over time are the lowest in decades, with the largest downshift in Asia.
- Per capita growth forecast decomposition covers 80 percent of world GDP at 2023 PPP.

*Source: World Economic Outlook, October 2023 — IMF*

### The Medium Term: Threading New Lows
- Medium-term forecasts are the lowest in decades.
- Permanent scarring expected to weigh on medium-term growth prospects.

*Source: World Economic Outlook, October 2023 — IMF*

### Policy priorities: From Disinflation to Sustained Growth
- Short-run impact priorities:
  - Durably restore price stability.
  - Safeguard macro-financial stability.
  - Normalize fiscal policy with an eye on the vulnerable.
  - Accelerate restructuring where necessary to avoid debt distress.
  - Avoid food insecurity through strengthened rules-based frameworks.
- Medium-run impact priorities:
  - Intensify macrostructural reforms to boost long-term growth.
  - Speed the green transition.
  - Strengthen multilateral cooperation to:
    - Ensure food and energy security.
    - Boost productivity growth.
    - Fight climate change.
    - Regulate potential emerging technologies.

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_Source: https://www.imf.org/-/media/files/oap/oap-home/2023/october-2023-weo-ch1.pdf_