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IMF: Global growth in 2024 will be stronger than expected

2024-01-31 10:06:06Biznes SHKRUAR NGA REDAKSIA VOX

IMF: Global growth in 2024 will be stronger than expected

Global growth is stronger than expected and will be 3.1% in 2024, the same as in 2023, as the US and emerging economies have shown resilience to previous crises, with strong consumption driving growth, according to the Monetary Fund International (IMF). The IMF raised its previous forecast by 0.2% in its latest World Economic Outlook report, taking into account improvements for China, the United States and major emerging economies. Global GDP is expected to accelerate slightly in 2025, by 3.2%. However, global growth is historically low, the average global GDP from 2000-2019 was 3.8%.

The outlook for Europe has dipped slightly for this year, largely due to weaker-than-expected growth in 2023. Tight monetary conditions and, in some cases, the withdrawal of fiscal support following the pandemic, coupled with low productivity held the bloc back. performance. Even European economies were still bearing the signs of relatively high exposure to the war in Ukraine. The IMF estimated that the Eurozone economy expanded by 0.5% in 2023.

Further to 2024, the IMF cut its forecast by 0.3% compared to its previous report in October and it now foresees a recovery, with GDP growth reaching 0.9% in the bloc, driven by stronger consumption households, such as slower inflation and rising real incomes. are born. The UK economy is facing a similar scenario with a modest recovery of 0.6% growth in 2024, after an estimate of 0.5% in 2023, as the lagged negative effects of high energy prices fade. Later in 2025, the UK economy is forecast to grow by 1.6%, as disinflation is likely to result in the Bank of England easing financial conditions as real incomes recover.

Germany, the strongest economy in the EU, is estimated to see a contraction, its GDP is forecast to fall by 0.3% in 2023 and will recover to achieve growth of 0.5% this year, before reaching 1.6% in 2025 France, the second largest economy in the bloc, is expected to grow 1% this year and 1.7% in 2025. Italy has perhaps the weakest outlook of the major economies in the Eurozone, as the IMF estimates 0.7% growth in 2023, as well in 2024 – and only 1.1% for the following year. On the other hand, Spain is expected to see growth of 1.5% this year, after seeing 2.4% in 2023, and is expected to be back on track with 2.1% in 2025.

The forecast notes that Russia has shown a stronger than expected performance in 2023, due to high military spending and strong consumption. These played a role in raising the IMF's expectations of Russia's GDP to 2.6% in 2024, which could be followed by a sharp decline and show only 1.1% growth in 2025. The United States, however, proved to be more resilient than expected, are facing a slowdown from their current highs. Largely due to tight monetary conditions and high borrowing costs, the IMF expects US GDP to slow from 2.5% in 2023 to 2.1% this year – and 1.7% in 2025.

The US economy is also expected to have the lagged effects of gradual fiscal tightening and the labor market to be softer, with fewer job vacancies and slightly higher unemployment. This could reduce consumption, the source of two-thirds of growth in the world's largest economy. However, for this year, the IMF added an upward revision of 0.6% from the October 2023 report based on the results of stronger than expected growth in 2023.

What is seen as the engine of global growth may be running out of steam, as growth in developing and emerging Asia is expected to decline in the next two years. The IMF estimate is 5.4%, 5.2% and 4.8% for 2023, 2024 and 2025 respectively. However, this year's forecast has been revised upwards by 0.4%, mainly due to the better than expected performance of the Chinese economy . The report notes that economic growth could be even higher than the current forecast due to faster-than-expected disinflation and prolonged supportive fiscal policy across the globe, as well as a faster recovery in China and if intelligence artificial is increasing productivity at the medium level. 

However, growth could be curbed by new commodity price increases from geopolitical shocks, including ongoing attacks on the Red Sea fueling inflation, leading to higher rates for a longer period than expected. This would prevent businesses from borrowing and investing, slowing economic growth. China's faltering growth, fueled largely by fears about its property sector, could also leave a serious dent in the global economy, as it accounts for 25% of its GDP.

The IMF advises policymakers to carefully orchestrate the eventual reduction in inflation, while it is also important to gradually withdraw the fiscal support created during the Covid-19 pandemic, noting that government debts are reaching very high levels. Looser fiscal policy may temporarily support growth.

However, it is time to rebuild buffers to prepare for future shocks and achieve debt sustainability, the report also noted. According to the IMF, the necessary structural reforms would reinforce productivity growth and debt sustainability. Also, more efficient multilateral coordination is needed to, among other things, create space for necessary investments, as well as to mitigate the effects of climate change.


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