2024 Global Growth Forecast Remains Stable from IMF, But Uncertainty Prevails

The IMF warned of a feeble period of economic growth in the medium term which is forecasted to look beyond the one-year outlook.

The International Monetary Fund (IMF) forecasted the 2024 global economy and projected that inflation continues to remain moderate. Surrounding the world outlook is a high degree of uncertainty. 

The global economy faces a weak period of medium term growth. This was stated by the IMF during the fund’s and World Bank’s annual meetings in Washington, they urged for a raft of reforms in their latest World Economic Outlook report.

The global economy will see a growth of 3.2% in 2024 and the next year 2025 as per the forecasts by IMF. The growth outlook for the US was raised by 2.8% this year by the IMF. This owes to non-residential investment and stronger consumption due to large wage gains.  

Before rising to 1.2% in 2025 on stronger domestic demand, growth is expected to rise to 0.8% due to the improved exports in the Euro area. The economic growth is expected to spur due to the falling interests in the UK and is expected to grow by 1.1% in 2024 and 1.5% in 2025. 

According to IMF director of research Pierre-Olivier Gourinchas, intensifying conflicts have resulted in “sizable downside” revisions for low-income and emerging nations.

The Middle East and Central Asia outlook is lowered by the IMF which is similar to the projections to the World Bank for the region last week. Saudi Arabia oil production cuts are down to 0.4% this year. Although the growth is expected to get back on track up to 3.5% in 2025. 

Alongside by the end of 2025 the headline inflation is projected to fall to 3.5% which in the past 20 years is slightly below the average of 3.6%. This is before the COVID-19 pandemic and its peak of 9.4% in 2022. 

This disinflationary process was completed without a worldwide recession, described as a soft landing, which Mr Gourinchas praised as a “major achievement.”

After a years-long monetary tightening drive, Mr Gourinchas stated that inflation is now approaching central banks’ targets. The headline inflation rate in the United States is currently 2.4%, whereas it is 1.7% in the Eurozone and the United Kingdom.

With the Federal Reserve announcing their first cut of 50 basis points in September during this cycle, the most advanced economies have also begun cutting interest rates. The UK cut rates by 25 basis points before holding ground while making its third quarter percentage point cut by the European Central Bank this year. 

“Despite the good news on inflation, risks are now tilted to the downside,” Mr Gourinchas said.

The geopolitical tensions are contributing to the heightened uncertainty especially in the Middle East could have a negative impact on the commodity markets. 

The Central banks will continue to run the risk of tightening monetary policy for a long period as per the IMF. This could adversely affect the growth. 

The IMF warned of a feeble period of economic growth in the medium term which is forecasted looking beyond the one-year outlook. 

With the growth slowing down but only marginally to 4.8% this year, China is projected to have a gradual slow down in the coming years. 

With inflation returning to most central banks’ targets, the IMF said that the recent move opens up the possibility of a “policy triple pivot,” which, according to the lender, would provide significant breathing room for governments.

It claimed lower interest rates in industrialized nations will relieve pressure on developing markets as their currencies begin to appreciate versus the US dollar. The IMF also urged states to shift their fiscal strategy and rebuild their fiscal buffers. The IMF has cautioned about the fiscal outlook, predicting that global debt will exceed $100 trillion by the end of the year. The fund also urged states to implement growth-productivity reforms.