IMF Raises Global Growth Forecast, Economy Proves 'Surprisingly Resilient' Despite Challenges

The International Monetary Fund (IMF) has made a modest upward revision in its global growth forecast. According to the latest report, the IMF now expects a global growth of 3.2% in 2024, which is an increase of 0.1 percentage point from its previous January forecast. This projection aligns with the growth estimate for 2023. Furthermore, the IMF anticipates that growth will maintain this pace at 3.2% in 2025.

IMF's Perspective

Pierre-Olivier Gourinchas, the IMF's chief economist, expressed that these findings indicate a potential "soft landing" for the global economy, following a series of economic challenges. Gourinchas highlighted the surprising resilience of the global economy despite earlier gloomy predictions, noting steady growth and a rapid slowdown in inflation.

Regional Outlook

The IMF predicts that advanced economies, including the United States, are expected to lead this growth, with the U.S. surpassing its pre-Covid-19 trend and the euro zone exhibiting strong signs of recovery. However, concerns loom over the economic outlook for China and other major emerging market economies, which could exert downward pressure on global trade partners. China's weakened economy, partly due to a downturn in its property market, is identified as a potential risk.

Downside Risks

The IMF has identified several downside risks to the global economy, including price spikes triggered by geopolitical tensions, trade frictions, differing inflation paths among major economies, and prolonged high interest rates. These factors, if materialized, could potentially hamper the global economic landscape.

Upside Potential

On a positive note, the IMF cited the potential growth drivers as looser fiscal policies, declining inflation, and advancements in artificial intelligence, which could contribute to the global economic expansion. Furthermore, the report emphasized the importance of central banks in managing inflation and the potential impact of geopolitical events on economic sentiment.

Inflation and Monetary Policies

The IMF foresees a decline in global headline inflation from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. It anticipates that advanced economies will return to their inflation targets earlier than emerging market and developing economies. The report urged central banks to navigate inflation smoothly by neither prematurely easing policies nor causing target undershoots due to delayed actions.

Medium-Term Fiscal Consolidation

Gourinchas stressed the importance of implementing medium-term fiscal consolidation to rebuild fiscal flexibility and prioritize investments while ensuring debt sustainability. This recommendation aligns with the IMF's goal of maintaining economic stability and resilience.