IMF predicts modest, stable global growth in 2024; concerns include inflation and China

IMF predicts modest, stable global growth in 2024; concerns include inflation and China

The IMF suggested that China assist disadvantaged families in order to help revive consumer demand while hastening the departure of unprofitable developers and encouraging the completion of unfinished housing projects.

The IMF projected 3.2% real GDP growth worldwide in 2024 and 2025, which is the same percentage as in 2023.

The International Monetary Fund predicted on Tuesday that the world economy will expand slowly but steadily in 2019. The U.S. economy is driving global production despite obstacles including persistently high inflation, poor demand in China and Europe, and the fallout from two regional conflicts.

The IMF projected 3.2% real GDP growth worldwide in 2024 and 2025, which is the same percentage as in 2023. The U.S. outlook saw a considerable upward adjustment, which was primarily responsible for the 0.1 percentage point increase in the 2024 projection from the January estimate in the World Economic Outlook.

According to Pierre-Olivier Gourinchas, the top economist at the IMF, "we find that the global economy remains quite resilient," adding that many nations have defied dire forecasts of recession as central banks have raised interest rates in an effort to combat inflation.

According to the IMF's research, several nations are also exhibiting less "scarring" from the COVID-19 pandemic and cost-of-living issues, recovering to production levels before to the epidemic sooner than first anticipated.

Although inflation is declining, efforts to return it to central bank objectives have stalled recently, according to Gourinchas, who also pointed out that recent data from the US indicates strong demand.

"Over the course of the year, we continue to anticipate a decline in inflation, which will position the Federal Reserve to begin reducing policy rates," he told Reuters. "Maybe not as quickly as what the markets had expected."

The IMF predicted stronger-than-expected job and consumer spending toward the end of 2023 and into 2024, leading to a 2.7% growth rate for the United States in 2024 as opposed to the 2.1% growth predicted in January. While that was also an increase from the 1.7% projection in January, it anticipates that the delayed effects of tighter fiscal and monetary policy would cause U.S. GDP to drop to 1.9% in 2025.

However, the most recent IMF projections revealed striking differences with other nations, such as in the euro zone, where the growth estimate for 2024 was cut down from 0.9% in January to 0.8%, mostly because of low consumer confidence in Germany and France. Britain, which is grappling with high interest rates and persistently rising inflation, had its growth estimate for 2024 lowered down by 0.1 percentage points to 0.5%.

China Property Issues

The IMF did not alter its prediction that China's growth will slow down to 4.6% in 2024 from 5.2% in 2023 and then to 4.1% in 2025. However, it cautioned that the absence of a comprehensive package of reforms for the nation's ailing real estate market might exacerbate China's outlook and prolong a decline in domestic demand.

A scenario that U.S. Treasury Secretary Janet Yellen warned about during a visit to China earlier this month could also exacerbate deflationary pressures in China's economy, resulting in a spike in low-cost manufactured goods exports that could fuel trade retaliation by other nations.

The IMF suggested that China assist disadvantaged families in order to help revive consumer demand, expedite the departure of unprofitable developers, and encourage the completion of unfinished housing projects.

The global lender did, however, highlight some encouraging developments in a few other significant emerging market nations, improving its estimates for the growth of the economies of Brazil and India by half a percentage point and 0.3 percentage point, respectively, to 2.2% and 6.8% in 2024.

It said that the major developing market nations that make up the Group of 20 are now better integrated into the world trade system and are able to bear a greater share of the growth burden in the future.

However, compared to middle-income emerging markets, the IMF said that low-income developing nations still have difficulties making post-pandemic adjustments and experience higher levels of economic "scarring". These emerging nations with low incomes saw their projected growth in 2024 lowered from 4.9% in January to 4.7% overall.

RUSSIAN RESILIENCE

One of the greatest shocks was the increase in Russia's growth prediction for 2024 from 2.6% to 3.2% in January. The report ascribed the increase in part to sustained high oil export earnings in the face of rising global oil prices despite a price-cap mechanism enforced by Western nations, as well as high government investment and spending on war production, as well as increased consumer spending in an extremely competitive labor market. Additionally, the IMF raised its estimate of Russia's growth in 2025 from 1.1% in January to 1.8%.

Forecasts indicate that Ukraine's growth, which is heavily reliant on Western economic help, would drop to 3.2% in 2024 then pick up speed to 6.5% in 2025.

Following Russia's invasion of Ukraine in 2022, the early price hikes for cereals, oil, and other commodities have decreased, but they might rise if the battle widens.

Similar to this, Gourinchas said that the trade interruptions and increased expenses for ships evading Red Sea strikes in the Middle East war have occurred on a "moderate scale," but "we are concerned about potential escalation.”