IMF forecasts 3.1% global growth in 2024

Global economic growth will reach 3.1% in 2024 and 3.2% in 2025, the International Monetary Fund (IMF) predicts in its latest World Economic Outlook released on January 30. Noting that its 2024 forecast is 0.2 percentage point higher than its previous estimation in October 2023, the IMF cited greater-than-expected resilience in the US and in several large emerging market and developing economies, as well as fiscal support in China.

Nevertheless, the latest forecast for global growth in 2024-2025 is still below the historical average of 3.8% over 2000-2019, reflecting restrictive monetary policies and the withdrawal of fiscal support by governments, as well as low underlying productivity growth, IMF noted.

Amid unwinding supply-side issues and restrictive monetary policies, inflation is falling faster than expected in most regions, IMF believed, predicting that global headline inflation may fall from an estimated 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025. In fact, that 2025 forecast revised down 0.2 percentage point compared with its prior projections in October 2023, the Fund noted.

With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced, the IMF report noted.

On the upside, faster disinflation could lead to further easing of financial conditions. Looser fiscal policy could imply temporarily higher growth, but at the risk of a more costly adjustment later. Stronger structural reform momentum could bolster productivity with positive cross-border spillovers.

On the downside, new commodity price spikes from geopolitical shocks-including continued attacks in the Red Sea and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions, the IMF warned, adding that deepening property sector woes in China or elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments.

Besides, rising trade distortions and geoeconomic fragmentation are expected to continue to weigh on the level of global trade, the IMF report added.

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