IMF projects 3.2% global growth in 2024

The global economy is expected to expand at a 3.2% pace, the same pace as last year. This is below the annual average of 3.8% over the past two decades. For advanced G-7 economies, growth is projected to rise to 1.7% this year from 1.6% in 2023. Growth in the euro area is projected to improve to a 0.8% annual rate from 0.4% in the prior year. Growth in the UK is seen rising to a 0.5% rate this year from 0.1% in 2023. The UK economy will continue to improve to a 1.5% rate in 2025, according to the projections. In Japan, growth will slow to a 0.9% rate in 2024 from 1.9% in the prior year as one-off factors, including a surge in tourism, fade. Growth in China is projected to slow from 5.2% in 2023 to 4.6% this year and 4.1% in 2025. Growth  in India is projected to remain strong at 6.8% in 2024. Inflation is expected to continue to fall. In the G-7 countries, inflation is expected to see inflation average 2% in 2025.

The outlook for the global economy is for continued solid growth and declining inflation, bolstered by stronger-than-expected growth in the United States, the International Monetary Fund said Tuesday. In its latest update of its World Economic Outlook, the IMF projected U.S. growth of 2.7% annual rate this year. That’s 0.6 percentage points higher than the forecast in January and 1.2 percentage points above the forecast last October. The U.S. economy will then cool slightly to a 1.9% rate in 2025, the agency  said. “The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated,” said IMF chief economist Pierre-Olivier Gourinchas, in a blog post accompanying the report. As a result, the Federal Reserve should take a gradual and cautious approach to reducing interest rates, Gourinchas said. The IMF expects the Fed to cut its benchmark rates by 75 basis points to 4.6% this year.

Gourinchas said he was concerned with fiscal policy in the U.S. The budget picture is “out of line with long-term fiscal sustainability” and could slow the progress on lowering inflation and raise financial stability risks, he said.“Something will have to give,” he concluded. With inflation projected to decline, policy interest rates of major central banks are expected to start declining in the second half of the year. The Bank of England is expected to reduce its policy rate to about 4.8% from 5.3%, and the European Central Bank to have cut its rate to 3.3% from 4%. For Japan, rates are expected to rise gradually. Global trade growth is expected to remain subdued, rising 3% in 2024 and 3.3% in 2025, well below the historical growth rate of 4.9%. Cross-border trade restrictions continue to proliferate, with 3,000 new restrictions last year, more than double to amount in 2019.