IMF leaves global 2024, 2025 economic growth outlook unchanged

By Yomna Yasser On Jul 16, 2024

The International Monetary Fund (IMF) on Tuesday left its global growth outlook unchanged for 2024 and 2025, projecting 3.2 per cent and 3.3 per cent growth respectively.

However, the IMF said in its upgraded World Economic Outlook on Tuesday that path forward appears less smooth than initially anticipated.

While global activity and trade initially surprised on the upside at the start of the year, there were notable exceptions. The US experienced a sharper-than-expected slowdown, while a temporary supply disruption hampered Japan’s growth. Europe, on the other hand, saw positive signs of recovery in the services sector, and China enjoyed a consumption-driven upswing. These developments have narrowed the gap between economies, suggesting convergence towards their individual potential growth rates.

Disinflation slows, inflation concerns rise:

Progress on disinflation, a key goal for central banks, is facing headwinds. Service sector prices remain stubbornly high, and though goods inflation is falling, it’s not happening as fast as expected. Additionally, wage growth continues at a brisk pace, putting pressure on prices. This has delayed policy normalisation in the US, putting them behind other advanced economies like the euro area on the path towards easing interest rates. Emerging markets, meanwhile, remain cautious due to external risks associated with currency fluctuations.

Despite the recent bumps in the road, the overall growth forecast remains stable. However, the IMF acknowledges that the composition of growth may change due to offsetting revisions in individual regions. Careful policy handling will be crucial to manage inflation and rebuild depleted buffers, ensuring growth continues on a stable path

“Growth is expected to remain stable. At 3.2 percent in 2024 and 3.3 percent in 2025, the forecast for global economic growth is broadly unchanged from that in April. Under the hood, however, offsetting growth revisions have shifted the composition.”