IMF predicts slightly slower global growth in 2024 and 2025

Global growth is expected to ease slightly to 3.2 per cent this year and remain at that level in 2025, the IMF announced Tuesday, while warning that the stable figures masked “important” regional and sectoral shifts.

In its new World Economic Outlook (WEO) report, the International Monetary Fund also estimates that global inflation will continue to ease, hitting 5.8 per cent this year, before falling to 4.3 pe rcent in 2025.

“The battle against inflation is almost won,” IMF chief economist Pierre-Olivier Gourinchas told reporters Tuesday. “The decline in inflation without a global recession is a major achievement.”

The Fund’s WEO report noted that global growth is expected to trend to a lackluster 3.1 percent by 2029, and warned of growing risks to that metric.

Beneath the relatively calm outlook for growth through 2025, “the picture is far from monolithic,” the Fund said, warning of “important sectoral and regional shifts” taking place over the past six months.

There are also a number of downside risks to growth, Gourinchas said, highlighting the prospect of “an escalation in regional conflict, especially in the Middle East.”

The WEO’s publication comes a day after the IMF and World Bank Annual Meetings got underway in Washington, bringing together finance ministers and central bankers from around the world for meetings on the health of the global economy.

The report finds that the United States has remained an engine of global growth -- in sharp contrast with the euro area, where expansion remains slow.

The world’s largest economy is now expected to grow by 2.8 percent this year, down ever-so-slightly from the 2.9 percent seen in 2023, but still a shade better than the Fund’s previous estimate in July.

It is then expected to ease somewhat to 2.2 percent in 2025 -- up 0.3 percentage points from July -- as fiscal policy is “gradually tightened and a cooling labor market slows consumption,” the IMF said.

“The US economy has been doing very well,” Gourinchas told AFP in an interview ahead of the report’s publication, pointing to strong productivity growth and the positive effects of a surge in immigration on economic growth.

He added that the United States is “very close” to achieving a soft landing -- a rare feat in monetary policy, where inflation falls to within targets without spurring a severe recession.

In Europe, growth is still trending higher, but remains low by historical standards, and is on track to be at an anemic 0.8 percent this year, rising slightly to 1.2 percent in 2025.

While France and Spain saw upgrades in their outlook for 2024, the IMF cut its projections for German growth by 0.2 percentage-points this year, and by half a percentage-point next year, citing its “persistent weakness in manufacturing.”

There was some good news in the United Kingdom, where growth is projected to accelerate in both 2024 and 2025, “as falling inflation and interest rates stimulate domestic demand.”

Growth in Japan is expected to slow sharply to just 0.3 percent this year, before accelerating to 1.1 percent next year, “boosted by private consumption as real wage growth strengthens,” according to the IMF.

The Fund expects the growth in economic output in China to continue to cool, easing from 5.2 percent last year to 4.8 percent this year, and then falling further to 4.5 percent in 2025.

“Despite persisting weakness in the real estate sector and low consumer confidence, growth is projected to have slowed only marginally,” the IMF said, pointing to “better-than-expected” net exports from the world’s second-largest economy.

The slowdown in India looks set to be more pronounced, with the IMF penciling in growth of 7.0 percent this year, down from 8.2 percent in 2023.

It is then set to slow even further to 6.5 percent, as the “pent-up demand accumulated during the pandemic” runs out, the IMF said.

The IMF expects growth in the Middle East and Central Asia to pick up slightly to 2.4 percent this year, before jumping to 3.9 percent in 2025 as the temporary effect of oil and shipping disruptions fade.

And in Sub-Saharan Africa, the IMF predicts that growth will remain unchanged at 3.6 percent this year, rising to 4.2 percent in 2025 as weather shocks abate and supply constraints ease.

Italy’s economic growth this year and next will be weaker than the government’s targets of 1% and 1.2% respectively, the International Monetary Fund (IMF) and the country’s main business lobby said on Tuesday.

The euro zone third-largest economy will expand by 0.7% in 2024, in line with last year’s rate, the IMF said in its “World Economic Outlook”, unchanged from its previous estimate in July.

It forecast next year’s growth at 0.8%, marginally down from 0.9% previously projected.

Business lobby Confindustria issued similar forecasts of 0.8% this year and 0.9% in 2025, with both bodies implicitly indicating that the expansionary measures in Rome’s 2025 budget presented this month will not boost the economy as intended.

Giorgia Meloni’s government said that tax cuts and extra spending in the budget would raise next year’s growth to 1.2% from a 0.9% projection under an unchanged policy scenario. Economy Minister Giancarlo Giorgetti acknowledged this month that this year’s growth target may be out of reach after downward revisions to the first two quarters made by national statistics bureau ISTAT.

The statistics office said so-called “acquired growth” at the end of the second quarter stood at 0.4%, down from the 0.6% estimated prior to the revisions. The IMF and Confindustria are the latest groups to recently issue growth forecasts below those of the government, following the Bank of Italy and the parliamentary budget watchdog UPB.

Agencies