The International Monetary Fund (IMF) has raised its global growth forecast slightly to 3.2% in 2024, indicating that the economy has shown resilience despite inflationary pressures and monetary policy changes. This growth rate is consistent with the projection for 2023, with further growth expected at the same pace in 2025. The IMF’s chief economist, Pierre-Olivier Gourinchas, believes the global economy is on track for a “soft landing” after a series of economic crises, with risks to the outlook now being broadly balanced. Advanced economies, particularly the U.S. and the euro zone, are expected to lead the way in growth, while concerns remain about China’s weakened economy due to the downturn in its property market.
China has been highlighted as a key downside risk to the global economy, along with potential price spikes due to geopolitical concerns, trade tensions, and diverging inflation paths among major economies. However, there are also potential upside factors such as looser fiscal policy, falling inflation, and advancements in artificial intelligence that could drive growth. Central banks are closely monitoring inflation levels, with uncertainty about when the Federal Reserve and the European Central Bank will adjust interest rates. The IMF predicts a decrease in global headline inflation from 6.8% in 2023 to 4.5% in 2025, with advanced economies expected to reach their inflation targets sooner than emerging markets.
As the global economy moves towards a soft landing, central banks are urged to ensure a smooth transition for inflation by avoiding premature easing policies or delaying adjustments too long, which could lead to target undershoots. Gourinchas suggests a renewed focus on medium-term fiscal consolidation to create space for budgetary maneuver and priority investments, as well as to ensure debt sustainability. Despite the more positive outlook, global growth remains low compared to historical levels due to weak productivity growth and increasing geopolitical fragmentation. The IMF’s five-year forecast anticipates global growth to be at 3.1%, the lowest level in decades.
Overall, the IMF’s revised growth forecast indicates a relatively positive outlook for the global economy in the coming years, with expectations of steady growth and a soft landing. While there are some downside risks to consider, such as the situation in China and geopolitical concerns, there are also potential positive factors that could drive growth. Central banks will need to carefully manage inflation and fiscal policy to support a smooth transition towards a more sustainable economic environment. Despite the challenges ahead, the IMF remains cautiously optimistic about the global economic landscape.
