IMF lifts global growth outlook, cuts Sub-Saharan Africa forecast
THE International Monetary Fund (IMF) yesterday edged its forecast for global economic growth higher, upgrading the outlook for both the United States and China — the world’s two largest economies — and citing faster-than-expected easing of inflation.
The IMF’s chief economist, Pierre-Olivier Gourinchas, said the global lender’s updated World Economic Outlook showed that a “soft landing” was in sight, but overall growth and global trade still remained lower than the historical average. However the fund downgraded its Sub-Saharan Africa forecast on subpar growth in Nigeria and South Africa, the region’s largest economies.
“The global economy continues to display remarkable resilience, with inflation declining steadily and growth holding up. The chance of a ‘soft landing’ has increased,” Gourinchas told reporters in Johannesburg, adding, “We are very far from a global recession scenario.”
But he cautioned that the base of expansion was slow and risks remained, including geopolitical tensions in the Middle East and attacks in the Red Sea that could disrupt commodity prices and supply chains.
Delays in announced fiscal consolidation in what Gourinchas called “the biggest global election year in history” could boost economic activity but might also spur inflation, he added.
The IMF said the improved outlook was supported by stronger private and public spending despite tight monetary conditions, as well as increased labour force participation, mended supply chains and cheaper energy and commodity prices.
The IMF forecast global growth of 3,1 percent in 2024, up two-tenths of a percentage point from its October forecast, and said it expected unchanged growth of 3,2 percent in 2025. The historical average for the 2000-2019 period was 38 percent. Global trade was expected to expand by 3,3 percent in 2024 and 3,6 percent in 2025, well below the historical average of 4,9 percent, with gains weighed down by thousands of fresh trade restrictions.
The IMF stuck with its October forecast for headline inflation of 5,8 percent for 2024, but lowered the 2025 forecast to 4,4 percent from 4,6 percent in October. Excluding Argentina, which has seen inflation spike, global headline inflation would be lower, Gourinchas said.
Advanced economies should see average inflation of 2,6 percent, down four-tenths of a percentage point from the October forecast, with inflation set to reach central bank targets of 2 percent in 2025. By contrast, inflation would average 8,1 percent in emerging markets and developing economies in 2024, before eas- ing to 6 percent in 2025.
The IMF said average oil prices would drop 2,3 percent in 2024, versus the 0,7 percent decline it had predicted in October, and said prices were expected to drop 4,8 percent in 2025. “Staying on the path to a soft landing will not be easy,” Gourinchas said, noting that new commodity price spikes from geopolitical shocks, including continued attacks on shipping in the Red Sea, could prolong tight monetary conditions. Gourinchas told reporters the IMF was watching developments in the Middle East closely, but the broader economic impact appeared “relatively limited” as of now.
“It doesn’t seem to represent, as of now, a major source of potentially reigniting supply-side inflation,” he said.
The United States got one of the biggest upgrades in the January update of the IMF outlook, with its GDP now forecast to expand by 2,1 percent in 2024 versus the 1,5 percent forecast in October. Growth was expected to ease to 1,7 percent in 2025. - Reuters