Global Growth Projections for 2024 and 2025
The IMF’s latest World Economic Outlook forecasts global growth at 3.2% for 2024 and 3.3% for 2025, consistent with their April predictions. Despite this steady outlook, the report notes a narrowing divergence in growth rates among different economies, indicating more uniform growth patterns across the globe.
Rising Inflation Risks
The report highlights increased risks that could drive prices higher, raising the possibility of prolonged high-interest rates. Escalating trade tensions are a significant concern, as they can elevate the costs of imported goods along the supply chain. Petya Koeva Brooks, Deputy Director in the IMF’s Research Department, discussed the growing evidence of trade fragmentation, with trade within politically aligned blocs remaining strong while trade between blocs has declined.
Economic Recovery in Europe
Europe shows signs of economic recovery, particularly in the services sector. This shift in demand from goods to services follows the easing of pandemic restrictions. Rising real wages and higher investments due to improved financial conditions are driving consumption. Growth in the eurozone is expected to reach 1.5% in 2025, with a modest increase of 0.9% forecasted for 2024. However, Germany faces a slower recovery due to its dependence on fuel-intensive industries and energy price shocks.
Slower Global Disinflation
The IMF warns that economic growth could lead to inflationary pressures, potentially delaying interest rate cuts. In the United States, a rise in sequential inflation has already postponed policy normalization. This delay contrasts with other advanced economies like the euro area and Canada, where underlying inflation is cooling. Emerging market economies remain cautious about cutting rates due to external risks and currency depreciation against the dollar.
Commodity Prices and Emerging Markets
The report projects a 5% increase in nonfuel commodity prices in 2024, while energy prices are expected to fall by about 4.6%. Stronger activity in China and India drives upward revisions for growth in emerging markets and developing economies, with China’s forecast at 5% and India’s at 7% for 2024. Despite China’s recent underwhelming GDP figures, addressing issues in the property market is crucial for boosting consumer confidence.
Policy Recommendations
The IMF advises central banks in countries facing inflation risks to avoid easing interest rates prematurely. To enhance medium-term growth, the report recommends better integrating women and immigrants into the workforce to boost labor output. It also emphasizes the need for multilateral cooperation to enhance trade and address global challenges, particularly the climate crisis.
SOURCE: Ref Image from Irish Examiner
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