'This could be a turning point': IMF raises growth outlook, sees inflation past peak

The International Monetary Fund inched up its outlook for global growth this year, reflecting greater-than-expected resilience in economies across the world while striking a more optimistic tone than in reports last year.

The IMF now sees global growth for 2023 reaching 2.9%, 0.2% higher than its previous forecast published in October.

"We've seen a lot of resilience in a number of economies throughout 2022, despite the really severe shocks, the cost of living crisis, the energy crisis, that has happened as a consequence of the pandemic, and then the Russian invasion of Ukraine," IMF Chief Economist, Pierre-Olivier Gourinchas, told Yahoo Finance.

"Around the world, you see labor markets that have been quite resilient; household consumption that has been stronger than expected and business investment. You put all this together, and you have a slightly more resilient global economy. We're expecting things to bottom out."

The IMF is not expecting a global recession this year, but cautions the balance of risks for the global outlook remain to the downside with the possibility of lower growth and higher inflation. The IMF's latest forecast would also still mark a slowdown from the 3.4% growth seen in 2022, as higher interest rates and Russia’s war in Ukraine continue to weigh on the world economy.

The international body said global headline inflation appears to have peaked in the third quarter last year. Still, underlying core inflation, which strips out volatile food and energy prices, has not yet peaked in most economies and remains well above pre-pandemic levels.

Global inflation is set to fall from 8.8% in 2022 to 6.6% this year and 4.3% in 2024; pre-pandemic inflation averaged closer to 3.5% globally.

"What we're seeing right now is relatively encouraging on inflation dynamics," said Gourinchas. "[In] 2023, growth could be bottoming out, inflation could be coming down. This could be a turning point."