The International Monetary Fund (IMF) recently revised its global economic growth forecast upward, citing a quicker-than-anticipated easing of inflation. This revision notably enhances the outlook for the United States and China, the two largest global economies.
IMF Revises Its Economic Outlook As Global ‘Soft Landing’ Seems Likely
IMF Chief Economist Pierre-Olivier Gourinchas highlighted the updated World Economic Outlook, indicating that the global economy is approaching a ‘soft landing’ phase. However, he cautioned that while inflation is steadily declining and growth is maintained, the expansion’s pace remains slow, and potential challenges lie ahead.
The IMF’s optimism is bolstered by increased public and private spending despite tight monetary conditions. Factors contributing to this positive outlook include higher labour force participation, repaired supply chains, and declining energy and commodity prices.
The IMF’s forecast for global growth in 2024 is 3.1%, a slight increase from its October prediction. The figure is expected to remain stable at 3.2% in 2025, although both figures are below the 3.8% historical average for 2000-2019.
Headline inflation forecasts for 2024 remain at 5.8%, but the 2025 prediction has been reduced to 4.4% from the earlier 4.6%. In advanced economies, average inflation is anticipated to drop to 2.6%, reaching central bank targets of 2% by 2025. However, emerging markets and developing economies might see higher inflation rates, averaging 8.1% in 2024 before reducing to 6% in 2025.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
The IMF also predicts a 2.3% drop in average oil prices in 2024, a more significant decrease than the 0.7% decline forecast in October. Prices are expected to fall further by 4.8% in 2025. The United States received a substantial upgrade in its GDP forecast, now expected to grow by 2.1% in 2024, up from the 1.5% projection in October.
Conversely, the euro area faced a downgrade, with expected growth of just 0.9% in 2024 and 1.7% in 2025. Germany, the largest European economy, is projected to see minimal GDP growth of 0.5% in 2024.
China’s GDP growth forecast for 2024 is 4.6%, an upward revision, with 4.1% growth expected in 2025. This positive adjustment reflects substantial fiscal support and a less severe slowdown in the property sector.
