The International Monetary Fund (IMF) on Tuesday raised its 2024 economic growth forecasts for the US, Brazil and Britain but cut them for China, Japan and the euro zone, adding that risks abound from armed conflicts, potential new trade wars and the hangover from tight monetary policy.
The IMF’s latest World Economic Outlook said the shifts will leave 2024 global GDP growth unchanged from the 3.2% projected in July, setting a lacklustre tone for growth as world finance leaders gather in Washington this week for the IMF and World Bank annual meetings. Global growth is projected to be 3.2% in 2025, one-tenth of a percentage point lower than forecast in July, while medium-term growth is expected to fade to a “mediocre” 3.1% in five years, well below its pre-pandemic trend, the report showed.
Nonetheless, the IMF’s Chief Economist, Pierre-Olivier Gourinchas, said the US, India and Brazil were showing resilience and a “soft landing” in which inflation cools without massive job losses had been achieved.
“It looks like the global battle against inflation has largely been won, even if price pressures persist in some countries,” Gourinchas said in a blog post.
But he told Reuters in an interview that there is a risk that monetary policy could “mechanically” become too tight without interest rate cuts in some countries as inflation subsides, weighing on growth and jobs.
“Right now, our assessment for monetary policy in most places, it’s about where we want it to be, but if inflation keeps coming down now, central banks have to start paying attention to what’s happening on the activity side. The IMF revised its 2024 US growth forecast upward by two-tenths of a percentage point to 2.8% due largely to stronger-than-expected consumption fuelled by rising wages and asset prices. The global lender also upgraded its 2025 US growth outlook by three-tenths of a percentage point to 2.2%, slightly delaying a return to trend growth.
Brazil got a sharp upgrade of nine-tenths of a percentage point, raising its projected growth rate this year to 3.0%, also on the back of stronger private consumption and investment. Mexico’s growth, however, was marked down by seven-tenths of a percentage point to 1.5% because of the effects of tighter monetary policy.
The IMF cut China’s 2024 growth rate by two-tenths of a percentage point to 4.8%, with a boost from net exports, partly offsetting continued weakness in the property sector and low consumer confidence. The IMF’s 2025 China growth forecast was unchanged at 4.5%, but the outlook does not include any impact from Beijing’s recently announced fiscal stimulus plans, which are still largely undefined.
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