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IMF projects modest global growth amid persistent inflation

Peter 17th Jul, 2024 Economy Business Edge Reporter
IMF projects modest global growth amid persistent inflation

The International Monetary Fund (IMF) has projected modest global economic growth over the next two years, driven by various regional dynamics, but cautioned about numerous risks that could derail this path.

In its latest update to the global economic outlook released on Tuesday, the IMF highlighted that while the United States is experiencing a slowdown, Europe appears to be bottoming out, and China is seeing a surge in consumption and exports. However, the momentum in combating inflation is waning, which might delay interest rate cuts and maintain the pressure of a strong dollar on developing economies.

The IMF maintained its forecast for real global GDP growth in 2024 at 3.2 percent, unchanged from its April prediction, and slightly increased its 2025 forecast by 0.1 percentage point to 3.3 percent.

  • Despite these updates, the growth levels are still insufficient to alleviate concerns of prolonged economic stagnation, a scenario IMF Managing Director Kristalina Georgieva has likened to the "cool 20s."

The forecast for growth in sub-Saharan Africa is revised downward, mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year.

Generally, the updated forecasts indicate some regional shifts among major economies. The IMF cut its 2024 growth forecast for the United States by 0.1 percentage point to 2.6 percent, citing slower-than-expected consumption in the first quarter.

  • The 2025 growth forecast for the U.S. remained unchanged at 1.9 percent, reflecting a slowdown driven by a weaker labor market and reduced spending in response to tighter monetary policy.
IMF projects modest global growth amid persistent inflation

IMF Chief Economist Pierre-Olivier Gourinchas noted in a blog post accompanying the report that growth in major advanced economies has become more synchronized as output gaps have narrowed. He pointed out that signs of a slowdown are increasingly evident in the United States, while Europe is showing signs of recovery.

These varying regional dynamics underscore the complexity of the global economic landscape and the challenges in navigating the path to sustained growth. 

“As the eight decades since Bretton Woods have shown, constructive multilateral cooperation remains the only way to ensure a safe and prosperous economy for all,” he said.

The report also shows that Inflation is expected to remain higher in emerging market and developing economies (and to drop more slowly) than in advanced economies. However, partly thanks to falling energy prices, inflation is already close to pre-pandemic levels for the median emerging market and developing economy.

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