The IMF announced Tuesday that global growth will slow slightly to 3.2 percent this year and remain there in 2025, but warned that the stable estimates disguise “important” regional and industry movements.
In its latest World Economic Outlook (WEO) report, the International Monetary Fund predicts that global inflation will continue to fall, reaching 5.8 percent this year before decreasing to 4.3 percent in 2025.
“We are seeing inflation moving in the right direction without a major slowdown in economic growth or a global recession,” IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview ahead of the report’s publication.
“In our baseline analysis, in advanced economies (inflation) will be back at central bank targets in 2025,” he continued, adding it would take “a little bit longer” for emerging markets.
The Fund’s WEO study observed that global growth is anticipated to slow to 3.1 percent by 2029, and warned of rising risks to that statistic.
Despite the relatively stable outlook for growth through 2025, “the picture is far from monolithic,” the Fund said, citing “important sectoral and regional shifts” in the last six months.
The WEO’s publication comes a day after the IMF and World Bank Annual Meetings began in Washington, which brought together finance ministers and central bankers from around the world to discuss the state of the global economy.
Strong growth in US
The report finds that the United States has remained an engine of global growth — in sharp contrast with the euro area, where expansion remains slow.
The world’s largest economy is now expected to grow by 2.8 percent this year, down ever-so-slightly from the 2.9 percent seen in 2023, but still a shade better than the Fund’s previous estimate in July.
It is then expected to ease somewhat to 2.2 percent in 2025 — up 0.3 percentage points from July — as fiscal policy is “gradually tightened and a cooling labor market slows consumption,” the IMF said.
“The US economy has been doing very well,” Gourinchas said, pointing to strong productivity growth and the positive effects of a surge in immigration on economic growth.
He added that the United States is “very close” to achieving a soft landing — a rare feat in monetary policy, where inflation falls to within targets without spurring a severe recession.
In Europe, growth is still trending higher, but remains low by historical standards, and is on track to be at an anemic 0.8 percent this year, rising slightly to 1.2 percent in 2025.
While France and Spain saw upgrades in their outlook for 2024, the IMF cut its projections for German growth by 0.2 percentage-points this year, and by half a percentage-point next year, citing its “persistent weakness in manufacturing.”
There was some good news in the United Kingdom, where growth is projected to accelerate in both 2024 and 2025, “as falling inflation and interest rates stimulate domestic demand.”
China and India slow
Japan’s growth is predicted to fall drastically to 0.3 percent this year before rising to 1.1 percent next year, “boosted by private consumption as real wage growth strengthens,” according to the IMF.
The Fund anticipates China’s economic production growth to slow further, falling from 5.2 percent last year to 4.8 percent this year and then to 4.5 percent in 2025.
“Despite persisting weakness in the real estate sector and low consumer confidence, growth is projected to have slowed only marginally,” the IMF stated, citing “better-than-expected” net exports from the world’s second-largest economy.
The slowdown in India appears to be more acute, with the IMF forecasting GDP of 7.0 percent this year, down from 8.2 percent in 2023.
It will then slow further to 6.5 percent as “pent-up demand accumulated during the pandemic” runs out, according to the IMF.
The IMF predicts that growth in the Middle East and Central Asia will speed up slightly to 2.4 percent this year, before rising to 3.9 percent in 2025 as the temporary effects of oil and shipping delays recede.
In Sub-Saharan Africa, the IMF expects that growth will stay stable at 3.6 percent this year, increasing to 4.2 percent in 2025 as weather shocks subside and supply restrictions ease.