IMF SEES SLOW, STEADY 2024 GROWTH

It cites weak demand in China and Europe, as well as Mideast conflict as headwinds

THE global economy is set for another year of slow but steady growth, the International Monetary Fund (IMF) said on Tuesday, with United States strength pushing world output through headwinds from lingering high inflation, weak demand in China and Europe, and spillovers from two regional wars.

The IMF forecast global real gross domestic product growth of 3.2 per cent for 2024 and 2025 — the same rate as in 2023.

The 2024 forecast was revised upwards by 0.1 percentage point (ppt) from the previous World Economic Outlook’s estimate in January, due to a significant upward revision in the US outlook.

“The global economy continues to display remarkable resilience with growth holding steady and inflation declining, but challenges still lie ahead,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said.

A potential escalation of the Middle East conflict after Iran’s rocket and drone attack on Israel could have a “strong effect” on limiting growth, he said, adding that it would raise oil prices and inflation, triggering tighter monetary policy from central banks.

The US Treasury is preparing to hit Iran with new sanctions soon that could limit its ability to export oil, US Treasury Secretary Janet Yellen said on Tuesday.

The IMF report described an “adverse scenario” in which a Middle East escalation would lead to a 15 per cent increase in oil prices and higher shipping costs would hike global inflation by about 0.7 ppt.

The IMF forecast that global median headline inflation will fall to 2.8 per cent by year end from four per cent last year, and to 2.4 per cent in 2025.

The IMF revised its forecast for 2024 US growth upward to 2.7 per cent from the 2.1 per cent projected in January, on strongerthan-expected employment and consumer spending.

European Central Bank President Christine Lagarde has cited the stark divergence between the US and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the euro zone 2024 growth forecast to 0.8 per cent from 0.9 per cent in January, due to weak consumer sentiment in Germany and France. Britain’s 2024 growth forecast was revised down by 0.1 ppt to 0.5 per cent amid highinterest rates and high inflation.

The IMF left unchanged its forecast for China’s 2024 growth to fall to 4.6 per cent from 5.2 per cent in 2023, with a further drop to 4.1 per cent for 2025.

It warned that the lack of a comprehensive restructuring package for the country’s troubled property sector could prolong a downturn in domestic demand and worsen China’s outlook.

Gourinchas said China’s stronger-than-expected firstquarter growth may prompt an upward revision to the outlook.

The global lender noted bright spots in some big emerging market countries, raising its growth forecast for Brazil this year by 0.5 ppt to 2.2 per cent and increasing the forecast for India’s growth by 0.3 ppt to 6.8 per cent.

It noted that Group of 20 large emerging market countries are playing a bigger role in the global trading system and have the capability to shoulder more of the growth burden going forward.

But it said low-income developing countries continue to struggle with post-pandemic adjustments and greater levels of economic “scarring” than middle-income emerging markets. As a group, they saw their 2024 growth forecast cut to 4.7 per cent from 4.9 per cent in January.