IMF upgrades global growth forecast as economy proves ‘surprisingly resilient’ despite downside risks

The
International
Monetary
Fund
on
Tuesday
slightly
raised
its
global
growth
forecast,
saying
the
economy
had
proven “surprisingly
resilient”
despite
inflationary
pressures
and
monetary
policy
shifts.

The
IMF
now
expects
global
growth
of
3.2%
in
2024,
up
by
a
modest
0.1
percentage
point
from
its
earlier

January
forecast,
and
in
line
with
the
growth
projection
for
2023.
Growth
is
then
expected
to
expand
at
the
same
pace
of
3.2%
in
2025.

The
IMF’s
chief
economist,
Pierre-Olivier
Gourinchas,
said
the
findings
suggest
that
the
global
economy
is
heading
for
a “soft
landing,”
following
a
string
of
economic
crises,
and
that
the
risks
to
the
outlook
were
now
broadly
balanced.

“Despite
gloomy
predictions,
the
global
economy
remains
remarkably
resilient,
with
steady
growth
and
inflation
slowing
almost
as
quickly
as
it
rose,”
he
said
in
a
blog
post.

Growth
is
set
to
be
led
by
advanced
economies,
with
the
U.S.
already
exceeding
its
pre-Covid-19
pandemic
trend
and
with
the
euro
zone
showing
strong
signs
of
recovery.
But
dimmer
prospects
in
China
and
other
large
emerging
market
economies
could
weigh
on
global
trade
partners,
the
report
said.

China,
whose
economy
remains
weakened
by
a
downturn
in
its
property
market,
was
cited
among
a
series
of
potential
downside
risks
facing
the
global
economy.
Also
included
were
price
spikes
prompted
by
geopolitical
concerns,
trade
tensions,
a
divergence
in
disinflation
paths
among
major
economies
and
prolonged
high
interest
rates.

To
the
upside,
looser
fiscal
policy,
falling
inflation
and
advancements
in
artificial
intelligence
were
cited
as
potential
growth
drivers.

Central
banks
are
now
being
closely
watched
for
a
signal
on
the
future
path
of
inflation,
with
opinion
diverging
on
either
side
of
the
Atlantic
as
to
when
the
Federal
Reserve
and
the
European
Central
Bank
will
cut
rates.
Some
analysts
have
recently
forecast
a
possible
Fed
rate
hike
as
stubborn
inflation
and
rising
Middle
East
tensions
weigh
on
economic
sentiment.

The
IMF
said
it
sees
global
headline
inflation
falling
from
an
annual
average
of
6.8%
in
2023
to
5.9%
in
2024
and
4.5%
in
2025,
with
advanced
economies
returning
to
their
inflation
targets
sooner
than
emerging
market
and
developing
economies.

“As
the
global
economy
approaches
a
soft
landing,
the
near-term
priority
for
central
banks
is
to
ensure
that
inflation
touches
down
smoothly,
by
neither
easing
policies
prematurely
nor
delaying
too
long
and
causing
target
undershoots,”
Gourinchas
said.

“At
the
same
time,
as
central
banks
take
a
less
restrictive
stance,
a
renewed
focus
on
implementing
medium-term
fiscal
consolidation
to
rebuild
room
for
budgetary
maneuver
and
priority
investments,
and
to
ensure
debt
sustainability,
is
in
order,”
he
added.

Despite
the
rosier
outlook
of
Tuesday,
global
growth
remains
low
by
historic
standards,
owing
in
part
to
weak
productivity
growth
and
increasing
geopolitical
fragmentation.
The
IMF’s
five-year
forecast
sees
global
growth
at
3.1%,
its
lowest
level
in
decades.