The International Monetary Fund's World Economic Outlook (WEO) confirms the risks ahead for the Australian and global economy.
The IMF states that global economic growth is still weak with growing concern of a prolonged period of sluggish global growth. The IMF notes that the risks to the global economy remain on the downside.
As a result of this weak growth, the IMF has downgraded its forecasts for global economic growth from its July World Economic Outlook Update. The world economy is now expected to grow at 2.9 per cent in 2013, down from 3.1 per cent in the IMF's July Update. The forecast for 2014 has been downgraded to 3.6 per cent from 3.8 per cent.
The IMF has downgraded their expected growth rates for the Australian economy by 0.5 percentage points for both 2013 and 2014, compared with the IMF's most recent Australian estimates published in the April 2013 World Economic Outlook. The IMF now forecasts Australia will grow by 2.5 per cent in 2013 and 2.8 per cent in 2014. These are calendar year forecasts but they are broadly in line with the forecasts released in the Pre-Election Economic and Fiscal Outlook.
Key economies in the Asia-Pacific region have had their forecast growth rates downgraded. China's growth has been downgraded to 7.6 per cent in 2013 and 7.3 per cent in 2014, from 7.8 and 7.7 per cent respectively in the IMF's July Update. India is expected to grow 3.8 per cent in the 2013 Indian fiscal year and 5.1 per cent in the 2014 Indian fiscal year, down from 5.6 and 6.3 per cent respectively in the IMF's July Update.
The IMF further notes that emerging market economies will still continue to account for the bulk of global growth in 2013 and 2014.
Worryingly, the IMF forecasts Australia's unemployment rate to rise from 5.6 per cent in 2013 to 6.0 per cent in 2014.
The downside risks documented in the World Economic Outlook confirms significant risks to the Australian Budget that will need to be appropriately managed by the Coalition Government.