Despite geopolitical uncertainties, the IMF raises its growth forecasts for 2024

Modest, but solid growth. In its latest forecasts, published Tuesday April 16, the International Monetary Fund (IMF) anticipates an increase in global gross domestic product (GDP) of 3.2% in 2024, a slight increase compared to its previous estimates in January (+ 0 .1 percentage point) and October 2023 (+ 0.3 percentage points).

Thus, the world economy should experience growth identical to that of 2023, while demonstrating, notes the Washington institution, a “surprising resilience” faced with the numerous shocks shaking the planet, such as the Russian war of invasion in Ukraine, the accentuation of geopolitical tensions or the rise in interest rates, which is weighing on activity.

Uncertainties increased after the first direct attack carried out by Iran against Israel, on the night of Saturday April 13 to Sunday April 14. The IMF’s chief economist, Pierre-Olivier Gourinchas, warned on Tuesday that the crisis in the Middle East increases the risk of a disruption in energy prices, which could delay the decline in inflation, while specifying that it was still too early to determine the consequences. After a slight decline on Monday, oil prices remained stable at midday on Tuesday: the price of a barrel of North Sea Brent was moving slightly below the threshold of 90 dollars (85 euros).

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With the multiplication of crises, whether health, linked to global warming or geopolitical, the IMF invites States to give themselves budgetary room for maneuver to better confront them. However, their deficits first widened in 2020, in the midst of the Covid-19 pandemic, then in 2023, to fight inflation.

Lower key rates

“In a world where supply shocks are increasingly frequent and financial needs are increasing to guarantee safety nets, respond to the challenges of climate adaptation, digital transformation, energy security and defense, [consolidation budgétaire] should become a priority,” writes Mr. Gourinchas, in the preamble to the IMF forecasts.

These deficits which increase the debt burden are costly for States, especially since the increase in interest rates intended to curb inflation. According to the Washington institution, the policy of budgetary rebalancing is now possible, now that the battle against rising prices is about to be won, at least in developed economies. Inflation there fell to 2.3% in the last quarter of 2023, the level before the health crisis, after reaching the peak of 9.5% a year earlier. And this while “the economy has recorded steady growth, defying warnings of stagflation and a global recession”notes the IMF.

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