The International Monetary Fund (IMF) on Tuesday revised downwards its earlier forecasts on the global economy, saying that the growth is expected to ease slightly to 3.2% this year and in 2025.
In its new World Economic Outlook (WEO) report, the Bretton Woods institution also estimated that global inflation would also ease, slowing to 5.8% this year and then sliding to 4.3% in 2025.
AFP quoted the IMF chief economist, Pierre-Olivier Gourinchas, as saying during in an interview ahead of the report’s publication that the Fund is “seeing inflation moving in the right direction without a major slowdown in economic growth or a global recession. In our baseline analysis, in advanced economies (inflation) will be back at central bank targets in 2025.”
According to him, it will take “a little bit longer” for emerging markets to experience slower general price levels.
The Fund’s WEO report also projected that global growth would be 3.1% by 2029, and warned of growing risks to that metric.
The IMF pointed out that despite the relatively calm outlook for growth through 2025, “the picture is far from monolithic”, citing some “important sectoral and regional shifts” that had taken place over the past six months to justify its forecasts.
An analysis of the highlights of the report showed that the Fund found that the United States had remained an engine of global growth in sharp contrast with the Euro area, where expansion had remained slow in the past months.
The report projected that world’s largest economy was expected to grow by 2.8% this year, down from the 2.9% recorded in 2023, but still better than the Fund’s previous estimate in July, after which it would ease to 2.2% in 2025 as fiscal policy is “gradually tightened and a cooling labor market slows consumption.”
In Europe, the Fund noted that growth was still trending higher, but remained low by historical standards, and is on track to be at 0.8 percent this year, then slightly rising to 1.2% in 2025.
Similarly, it estimated that growth in Japan would slow sharply to just 0.3 percent this year, before hitting 1.1% next year, mainly based on “private consumption as real wage growth strengthens.”
The Fund expects the growth in economic output in China to continue to cool, easing from 5.2% last year to 4.8% this year, and then falling further to 4.5% in 2025.
This is even as it predicted that slowdown in India looked set to be more pronounced, estimating the country’s growth at 7.0% this year, down from 8.2% in 2023 and that the rate would slow even further to 6.5%, as the “pent-up demand accumulated during the pandemic” runs out.
Also, IMF in the report expects growth in the Middle East and Central Asia to pick up slightly to 2.4% this year, before jumping to 3.9% in 2025 as the temporary effect of oil and shipping disruptions fade.
For Sub-Saharan Africa, the IMF predicts that growth will remain unchanged at 3.6% this year, rising to 4.2% in 2025 as weather shocks continue to abate and supply constraints gradually ease.
