As inflation declines, the International Monetary Fund projects that global growth will stay steady at 3.2% in 2024 and 2025, according to the IMF’s most recent World Economic Outlook Update Report for October 2024, “Policy Pivot, Rising Threats,” which was presented on Tuesday at the IMF/World Bank Meetings in Washington, D.C. The report stated that while the projection was in line with the July and April 2024 WEO, there had been significant revisions since the April WEO.
The report also highlighted potential risks to the global economy, including geopolitical tensions and trade disputes, which could impact growth in the coming years. Despite these challenges, the IMF remains cautiously optimistic about the overall outlook for the global economy.
The research claims that significant downward growth revisions have occurred in a number of low-income and developing economies. These adjustments are frequently linked to conflicts, civil unrest, extreme weather occurrences, and disruptions in the production and shipment of commodities, particularly oil.
According to the report, they have been offset by improvements to the estimate for emerging Asia, where growth has been supported by the surge in demand for electronics and semiconductors brought on by large investments in artificial intelligence.
According to the report, the United States’ growth was robust in 2024, coming in at 2.8%, but it will return to its potential in 2025.
According to the analysis, mature European economies should see a small recovery in growth in 2025, with output coming close to potential. With continuing strong performance from emerging Asia, the growth outlook for developing countries and emerging markets was steady at about 4.2% in 2024 and 2025.
“Global growth should reach 3.1% in five years, which is a mediocre performance when compared to the pre-pandemic average,” the report stated.
Despite persistent service price increases in many nations, the report demonstrated global disinflation.
“We now project headline inflation will fall to 3.5% by the end of next year after peaking at 9.4% year-over-year in the third quarter of 2022,” the statement read.
This is little less than the mean for the 20 years prior to the pandemic.
“Inflation is now approaching central bank targets in the majority of countries, opening the door for monetary easing across major central banks.”
According to the research, a policy triple pivot was made possible by the return of inflation close to central bank targets, which gave the macroeconomic breathing room that was sorely required when risks and difficulties remained high.
“The initial shift in monetary policy has already begun. Major advanced-economy central banks have been lowering policy rates since June in an effort to become more neutral. At a time when the labor markets of many industrialized nations are cooling and unemployment rates are rising, this will boost activity.
currency and financial conditions improving, “Emerging market economies will be less affected by lower interest rates in major economies, as their currencies appreciate versus the US dollar.” According to the IMF research, this will lessen imported inflation and make it easier for these nations to follow their own disinflationary path.
According to the paper, countries would need to stabilize debt dynamics and restore much-needed fiscal buffers in order to implement the second pivot on fiscal policy.
It emphasized that “monetary policy can play a supporting role by easing policy rates while keeping inflation in check, the more credible and disciplined the fiscal adjustment.” “The rate of adjustment should be adapted to the unique circumstances of each country.”
It stated that the third and most difficult pivot was in the direction of measures that would boost growth.
The research stated that while help for the most vulnerable should continue, structural reforms were required to improve medium-term growth prospects.
It stated that fostering trust between the people and the government was essential to the success and societal acceptance of changes.
It further stated that “a two-way process throughout the policy design, the inclusion of proper compensation to offset potential harms, and the development of trust between the government and citizens are essential features.”
According to the report, global cooperation was more important than ever in order to assist debt restructuring initiatives and hasten the green transition.
