NEW YORK (AFP): The IMF announced Tuesday it has raised its 2024 global growth forecast to 3.1 percent, citing unexpected “resilience” in major advanced and emerging market economies around the world.
The updated figure, released in the latest World Economic Outlook (WEO) report, is 0.2 percentage points higher than the International Monetary Fund’s previous forecast in October.
“We had simultaneously less inflation and more growth,” IMF chief economist Pierre-Olivier Gourinchas told reporters ahead of the report’s publication.
“It’s not just a US story. There was a lot of resilience in many, many parts of the world in the last year and going into 2024,” he said, highlighting countries including China, Russia, Brazil and India.
Despite the upgrade, global growth is predicted to remain below its recent historical average of 3.8 percent this year and next due to continued impacts of elevated interest rates, the withdrawal of pandemic-related government support, and persistently low levels of productivity.
Among the Group of Seven (G7) advanced economies, growth in European countries looks set to remain weak, reflecting ongoing challenges, while Japan and Canada are expected to fare slightly better.
The IMF’s overall inflation outlook remained unchanged at 5.8 percent for 2024, but that masks a significant underlying shift between richer and poorer countries.
Inflation in advanced economies is now forecast to be 2.6 percent in 2024, down 0.4 percentage points from October, while emerging and developing economies are expected to hit an annual inflation rate of 8.1 percent, up 0.3 percentage points.
Much of the increase can be attributed to ongoing trouble in Argentina, where consumer price increases exceeded 200 percent last year amid an ongoing economic crisis.
– US, China lift growth –
The United States and China, the world’s two largest economies, both saw significant upgrades to their growth outlook for 2024, putting them on track for a less substantial slowdown than the IMF previously anticipated.
The IMF now expects the US economy to grow by 2.1 percent in 2024 — an election year in which President Joe Biden is seeking a second term — down slightly from an estimated 2.5 percent in 2023.
This is largely due to the “statistical carryover effects from the stronger-than-expected growth outcome for 2023,” the IMF said.
China’s economy is meanwhile on track to hit 4.6 percent growth this year, down from 5.2 percent last year.
The better-than-expected growth figures are down to property sector “difficulties” having a less severe impact than the IMF had anticipated, and also because of the “significant fiscal support coming from the authorities,” Gourinchas said.
An ongoing bright spot in the global economy continues to be India, which the IMF now expects to grow by 6.5 percent this year — up 0.2 percentage points from October — following an estimated growth rate of 6.7 percent in 2023.
The Fund also increased the growth prospects for Russia, Iran and Brazil for the year ahead.
– Challenges remain in Europe –
While many Asian economies remain buoyant, Europe continues to cast a long shadow over the global outlook, with the IMF highlighting “notably subdued growth in the euro area.”
Germany is once again set to be the slowest-growing G7 economy, expanding by just 0.5 percent this year after contracting by an estimated 0.3 percent in 2023.
The United Kingdom, France and Italy are all also expected to see growth of 1.0 percent or less this year, while Spain’s economy is forecast to fare slightly better, growing by 1.5 percent.
The tepid euro area growth reflects “weak consumer sentiment, the lingering effects of high energy prices, and weakness in interest-rate-sensitive manufacturing and business investment,” the IMF noted in the WEO report.
Despite some challenging forecasts, the overall picture in 2024 looks set to be less gloomy for many countries than it was in 2024: Every country cited in the WEO report save Argentina is set to have positive growth this year.
This is an improvement from 2023, when four out of the 30 economies cited in the report are estimated to have contracted, according to the IMF.
IMF cuts 2024 inflation forecast for advanced economies
The IMF announced Tuesday that it has cut its 2024 inflation forecast for richer countries due to the success of higher interest rates, but raising its outlook for other economies.
The International Monetary Fund reduced its 2024 inflation forecast for advanced economies to 2.6 percent, down 0.4 percentage points from its last update in October, while lifting its outlook for emerging market and developing economies by 0.3 percentage points to 8.1 percent.
The headline global inflation forecast for 2024 remained unchanged.
IMF slashes Argentina’s growth forecast for 2024
The IMF announced Tuesday it has significantly scaled back Argentina’s 2024 growth prospects, and now expects its economy to contract for a second straight year amid an ongoing financial crisis.
The International Monetary Fund predicts that the South American country’s economy will contract by 2.8 percent this year, following an estimated contraction of 1.1 percent in 2023.
This marks a 5.6 percentage point cut from its last economic forecast in October, when it predicted growth of 2.8 in 2024.
Latin America’s third-largest economy is grappling with a severe economic crisis after decades of mismanagement that has driven poverty levels to 40 percent, and pushed inflation to an annual rate of more than 200 percent.
Argentina’s newly elected President Javier Milei, a populist outsider and self-described “anarcho-capitalist,” has embarked on a dramatic cost-cutting drive to turn things around, devaluing the peso by more than 50 percent, cutting state subsidies for fuel and transport, and reducing the number of ministries by half.
He has insisted that the immediate pain these policies are causing will be worth it in the longer term. But many citizens fear his package of deregulation and economic reform will leave them less well-off, and have taken to the streets in protest in recent days.
Argentina’s economic woes are reflected across the updated forecasts to the IMF’s World Economic Outlook (WEO).
The Fund’s 2024 growth forecast for Latin America and the Caribbean was revised down 0.4 percentage points to 1.9 percent, reflecting “negative growth in Argentina in the context of a significant policy adjustment to restore macroeconomic stability,” it announced in the WEO update on Tuesday.
The IMF also noted that Argentina’s inflationary surge was the main driver pushing up the 2024 inflation outlook for emerging market and developing economies to 8.1 percent.
“The realignment of relative prices and elimination of legacy price controls, past currency depreciation, and the related pass-through into prices is expected to increase inflation in the near term,” it added.
