IMF projects 3.1 per cent global growth in 2024
THE International Monetary Fund (IMF), in its latest World Economic Outlook (WEO) report, has projected global growth of 3.1 per cent this year even as its 3.2 per cent forecast for the year following continues to be hinged on the monitoring of inflation globally backed by greater levels of resilience and fiscal support in larger economies.
The entity, in the official release of its January report, said that the risks to global growth are at this time broadly balanced with a soft landing for most economies seemingly more possible.
“Advanced economies are expected to see growth decline slightly in 2024 before rising in 2025, with a recovery in the euro area from low growth in 2023 and a moderation of growth in the United States. Emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences,” the report stated.
The forecast for growth in the United States it estimates will fall from 2.5 per cent in 2023 to 2.1 per cent in 2024 and 1.7 per cent in 2025, with the lagged effects of monetary policy tightening, gradual fiscal tightening, and a softening in labour markets slowing aggregate demand. For Latin America and the Caribbean growth is also projected to decline from an estimated 2.5 per cent in 2023 to 1.9 per cent in 2024 before rising to 2.5 per cent in 2025.
With inflation falling faster than expected in most economies amid continued supply chain challenges and restrictive monetary policy, the Washington, Dc-based, institution said it is also expecting global headline inflation to fall to 5.8 per cent in 2024 and to 4.4 per cent in 2025. This stood at 6.8 per cent in 2023.
“Overall, about 80 per cent of the world’s economies are expected to see lower annual average headline and core inflation in 2024. Among economies with an inflation target, headline inflation is projected to be 0.6 percentage points above target for the median economy by the fourth quarter of 2024, down from an estimated gap of 1.7 percentage points at the end of 2023. Most of these economies are expected to reach their targets (or target range midpoints) by 2025,” the IMF said.
IMF’S chief economist Pierreolivier Gourinchas, in presenting the latest forecast for the global economy, in a briefing on Tuesday urged policymakers to maintain a steady hand to avoid the urge to prematurely declare victory amid improved conditions.
“The clouds are beginning to part. The global economy begins the final descent towards a soft landing, with inflation declining steadily and growth holding up. But the pace of expansion remains slow and turbulence may lie ahead. With inflation receding and growth remaining steady, it is now time to take stock and to look ahead,” he stated, citing the biggest challenge ahead as being that for economies to tackle elevated fiscal risks.
“Policymakers’ near-term challenge is to successfully manage the final descent of inflation to target, calibrating monetary policy in response to underlying inflation dynamics and — where wage and price pressures are clearly dissipating — adjusting to a less restrictive stance. At the same time, in many cases, with inflation declining and economies better able to absorb effects of fiscal tightening, a renewed focus on fiscal consolidation to rebuild budgetary capacity to deal with future shocks, raise revenue for new spending priorities, and curb the rise of public debt is needed,” the report further stated.
“Targeted and carefully sequenced structural reforms will reinforce productivity growth and debt sustainability as it accelerate convergence toward higher income levels. More efficient multilateral coordination will also be needed for, among other things, debt resolution, to avoid debt distress, and to create space for necessary investments as well as to mitigate the effects of climate change,” it added.