On January 30, the International Monetary Fund (IMF) released its latest World Economic Outlook (WEO), raising its forecast for global economic growth in 2024 to 3.1% thanks to the unexpected recovery in developed and emerging economies around the world, including the US and China. The new forecast is 0.2 percentage points higher than the IMF's previous forecast in October 2023. Speaking to the press, IMF chief economist Pierre-Olivier Gourinchas said: "The global economy continues to show remarkable resilience, thanks to steadily falling inflation and stable growth." However, Mr. Gourinchas warned that although the possibility of a soft landing has increased, growth remains slow and risks remain. The IMF forecasts that in 2024 and 2025, global growth will remain below its recent historical average of 3.8% due to the continued impact of high interest rates, the withdrawal of government support to respond to the COVID-19 pandemic and persistently low productivity. Among the Group of Seven (G7) economies, growth in European countries remains weak while Japan and Canada are expected to grow better.
The IMF forecasts headline inflation unchanged at 5.8% in 2024, but there is a significant fundamental shift between richer and poorer countries. Specifically, inflation in advanced economies is forecast to be 2.6% in 2024, down 0.4 percentage points from the October 2023 forecast, while inflation in emerging and developing economies is expected to reach 8.1%, up 0.3 percentage points. The main reason for the increase is the problem in Argentina, where consumer prices rose more than 200% in 2023 amid the economic crisis. "With the exception of Argentina, global inflation will decline to 4.9% this year," said Mr. Gourinchas. According to the IMF, the US and China, the world's two largest economies, both have significantly improved growth prospects in 2024. The IMF forecasts the economy The US will grow 2.1%, down slightly from 2.5% in 2023. Meanwhile, China's economy is on track to grow 4.6% this year, up 0.4 percentage points from the previous forecast, although this is lower than the 5.2% growth in 2023.
India continues to be a bright spot in the global economy, with the IMF forecasting it will grow 6.5% this year – up 0.2 percentage points from its October 2023 forecast. The IMF also raised its growth forecasts for Russia, Iran and Brazil next year. While many Asian economies are still doing well, Europe continues to cast a shadow over the global outlook, with the IMF noting “a notable slowdown in growth in the Eurozone.” Germany is once again the slowest-growing G7 economy, growing just 0.5% this year. The UK, France and Italy are all forecast to grow by 1% or less this year, while Spain’s economy is forecast to do slightly better at 1.5%. The eurozone’s lackluster growth reflects “weak consumer sentiment, the lingering impact of high energy prices, weakness in business investment and high interest rates weighing on manufacturing activity,” the IMF said. Overall, the picture is less bleak in 2024. With the exception of Argentina, all countries in the report are expected to post positive growth this year.
This is an improvement from 2023, when four of the 30 economies covered in the report were in recession./.
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