The global economy will experience its weakest growth since 1990 over the coming five years, with inflation falling more slowly than previously predicted, according to the International Monetary Fund's latest economic outlook.

Key points in IMF's 'A Rocky Recovery' report

• The global economy will grow at around 3 percent annually over next five years

• Average global inflation will shrink more slowly than previously predicted – down to 7 percent this year and to 4.9 percent in 2024

• Several European economies will post growth of less than 1 percent this year, with some, including Germany and the UK, shrinking slightly

• India and China will counterbalance that stagnation, the two nations accounting for around half of all global economic expansion in 2023

One of the key reasons for the sluggish prospects is high borrowing costs in North America and Europe. And the report warns of "turbulence" below the surface, citing fragility exemplified by the recent banking crisis, which saw the collapse of Credit Suisse and Silicon Valley Bank among others.

Hopes of a swift improvement in the world economy overall in 2023 have receded as the conflict in Ukraine continues and geopolitical tensions remain high. 

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The eurozone and the UK are singled out for lagging behind the pack, with growth in some European nations predicted to continue falling throughout this year, before rebounding slightly in 2024. 

GDP in Germany and the UK is forecast to contract in 2023, by 0.1 percent and 0.3 percent respectively. Core inflation is described as "sticky," the IMF warning that it is still yet to peak in many countries, once volatile energy and food factors are discounted.

But officials nonetheless have been keen to highlight positives. Previewing the report in Washington last week, IMF Managing director Kristalina Georgieva said she believed that a more stark and gloomy situation had been avoided due to "strong and coordinated monetary and fiscal policy actions over the past years."

And writing in Tuesday's report, Economic Counsellor Pierre-Olivier Gourinchas said he was unconvinced by fears of a wage-price spiral. 

"Nominal wage inflation continues to lag far behind price inflation, implying a steep and unprecedented decline in real wages. Given the tightness in labor markets, this is unlikely to continue, and real wages should recover," he said.

Developing countries 'marching ahead'

Most notable in the report is the more upbeat performance of developing economies – many said to be "powering ahead" of Europe and North America. 

Supply chain issues are said to have eased significantly, and the IMF states that China is fast pulling away from the effects of the COVID-19 shutdowns, with its economic recovery having a beneficial ripple effect in other east and southeast Asian nations. 

The report mentions a number of measures by Chinese authorities as having had a positive impact – such as monetary easing, tax relief for businesses and policies aimed at accelerating the completion of construction projects. 

Most notably, both China and India are projected to show growth higher than 5 percent this year, and within 4 to 6 percent in 2024 – considerably higher than the 3 percent average for all economies, and around four to five times higher than many advanced economies. 

The IMF's twice-per-year forecasts are watched closely by economists and are usually found to be reasonably accurate markers of the world's economic headwinds, with the exception of years immediately preceding major economic downturns. 

A 2019 study by Bloomberg said the organization achieved a 0.1 percent margin of error 6.1 percent of the time.

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