WASHINGTON (Reuters) – The International Monetary Fund (IMF) raised its forecast for global growth on Tuesday, raising the outlook for the United States and China while pointing to a faster decline in inflation provided that.
IMF chief economist Pierre-Olivier Gourinchas said the January economic outlook showed a “soft landing” was in sight, but that global growth would remain below its historical average.
“We see that the global economy continues to demonstrate remarkable resilience and that we are now in the final stages before a ‘soft landing’, with inflation steadily falling and growth holding steady,” said Pierre-Olivier Gourinchas. “But turbulence cannot be ruled out in the future.”
The IMF said higher private and public spending despite tight monetary conditions, a rising labor force, an end to tensions on supply chains and weaker commodity prices had contributed to the strong performance.
The IMF projects global growth of 3.1% in 2024, up 0.2 percentage points from its October forecast, and expects growth to be unchanged at 3.2% for 2025. Growth average for the period 2000-2019 is 3.8%.
The IMF forecasts global trade growth of 3.3% in 2024 and 3.6% in 2025, below the historical average of 4.9%.
The IMF maintained its October forecast for global inflation at 5.8% in 2024, but lowered that for 2025 to 4.4%, from 4.6% previously. Global inflation would be lower without Argentina, which has seen a spike in price increases, Pierre-Olivier Gourinchas said.
Advanced economies are expected to see average inflation of 2.6%, down 0.4 percentage points from the October forecast, with inflation expected to reach 2% in 2025. In contrast, inflation would settle averaging 8.1% in emerging markets and developing economies in 2024, before falling to 6% in 2025.
BALANCED RISKS
The tightening of monetary conditions could continue, however, warned the institution, in particular if geopolitical tensions cause the prices of raw materials to rise again. Pierre-Olivier Gourinchas said the IMF was closely monitoring developments in the Middle East, but the global economic impact remained “relatively limited.”
The United States benefited from one of the largest upward revisions to its economic outlook in January, with the economy expected to grow 2.1% in 2024 compared to 1.5% in October. Growth is expected to slow to 1.7% in 2025.
Pierre-Olivier Gourinchas attributed the improvement to U.S. fiscal support and strong consumer spending, but said the IMF had raised concerns with Washington that some of its industrial policies could violate global trade rules. .
The outlook for the Eurozone has been revised downward, with the bloc expected to grow by only 0.9% in 2024 and 1.7% in 2025. Germany is expected to post growth of 0.5% in 2024, compared to 0.9% expected in October.
China’s GDP is expected to grow 4.6% in 2024, an upward revision of 0.4 percentage points from October, and advance 4.1% in 2025. Pierre-Olivier Gourinchas said the revision The upward trend reflected significant fiscal support from the authorities and a less significant slowdown than expected in the real estate sector.
The US Federal Reserve, the European Central Bank and the Bank of England are expected to maintain interest rates at their current levels until the second half of 2024, according to the IMF, which then expects a gradual easing.
Pierre-Olivier Gourinchas added that markets had been “excessively optimistic” about the prospects for monetary easing, and that a reassessment of these prospects could increase long-term rates and weigh on growth prospects.
Growth in emerging and frontier markets is expected to be 4.1% in 2024.
Pierre-Olivier Gourinchas said the global outlook incorporated a better balance of risks, with the risk of wider conflict in the Middle East offset by the prospect that lower fuel prices could help reduce inflation more quickly provided that.
“We consider the risks to be broadly balanced at this stage,” he said, noting that the risks mentioned last year had not materialized.
(Written by Andrea Shalal, French version Corentin Chappron, edited by Blandine Hénault)
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