By David Lawder
The International Monetary Fund (IMF) has issued an update to its World Economic Outlook(WEO), forecasting modest growth in the global economy over the next two years. The report highlights cooling activity in the U.S., a stabilization in Europe, and stronger consumption and exports for China. However, risks to this path of growth are looming, with concerns over inflation and interest rates.
The IMF kept its 2024 global real gross domestic product growth forecast unchanged at 3.2% and raised its 2025 forecast to 3.3%. Despite these revisions, the outlook remains lackluster, leading to what IMF managing director Kristalina Georgieva has termed "the tepid twenties."
While major advanced economies are aligning as output gaps close, the U.S. is showing signs of cooling with reduced growth forecasts. In contrast, Europe is expected to pick up momentum. China's growth forecast has been significantly hiked, but recent data poses downside risks, particularly in consumer confidence and the property sector.
The IMF also warns of inflation risks and potential protectionism as a result of political shifts globally. The Fund recommends policymakers focus on restoring price stability, gradual monetary policy easing, replenishing fiscal buffers, and pursuing policies that promote trade and productivity.
In conclusion, the global economy is on a path of modest growth, but risks such as inflation, interest rates, and protectionism could derail this progress. It is crucial for policymakers to address these challenges to ensure sustainable economic growth and stability.