Outlook for world economy brighter: IMF
The International Monetary Fund has upgraded its outlook for the global economy this year, saying the world appears headed for a “soft landing” – reining in inflation without much economic pain and producing steady if modest growth.
The IMF now envisions 3.2% worldwide expansion this year, up a tick from the 3.1% it had predicted in January and matching 2023’s pace. And it foresees a third straight year of 3.2% growth in 2025.
In its latest outlook, the IMF, a 190-country lending organization, notes that the global expansion is being powered by unexpectedly strong growth in the United States, the world’s largest economy. The IMF expects the US economy to grow 2.7% this year, an upgrade from the 2.1% it had predicted in January and faster than a solid 2.5% expansion in 2023.
Though sharp price increases remain an obstacle across the world, the IMF foresees global inflation tumbling from 6.8% last year to 5.9% in 2024 and 4.5% next year. In the world’s advanced economies alone, the organization envisions inflation falling from 4.6% in 2023 to 2.6% this year and 2% in 2025, brought down by the effects of higher interest rates.
The Federal Reserve, the Bank of Japan, the European Central Bank and the Bank of England have all sharply raised rates with the aim of slowing inflation to around 2%. In the United States, year-over-year inflation has plummeted from a peak of 9.1% in the summer of 2022 to 3.5%. Still, US inflation remains persistently above the Fed’s target level, which will likely delay any rate cuts by the US central bank.
Globally, higher borrowing rates had been widely expected to cause severe economic pain – even a recession – including in the US. But it hasn’t happened. Growth and hiring have endured even as inflation has decelerated.
“Despite many gloomy predictions, the global economy has held steady, and inflation has been returning to target,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters ahead the release of the fund’s latest World Economic Outlook.
Growth and hiring have endured even as inflation has decelerated