The International Monetary Fund dampened its forecasts for a “limping” global economy on Tuesday despite it showing resilience against big shocks like the Covid-19 pandemic, cost of living and energy crises, soaring inflation and Russia’s war in Ukraine, a report that comes on the heels of new war after Hamas launched an attack on Israel over the weekend.
The IMF and World Bank are holding annual meetings in Marrakesh.
Global economic growth is expected to slow to 2.9% in 2024, according to the IMF’s latest World Economic Outlook report, a downgrade of 0.1 percentage points from the group’s last projection in July.
The figure, down from growth of 3.5% in 2022 and 3% this year, “remains well below the historical average” and marks the lowest growth forecast in decades, said Pierre-Olivier Gourinchas, the IMF’s chief economist.
The IMF’s predictions for 3% growth during 2023 were unchanged from projections it made in July.
While global growth may have slowed, Gourinchas said it has not stalled and showed “remarkable” resilience to the shocks of the past few years, adding that it is on track for a “soft landing scenario” where inflation could be contained without triggering a recession.
Central banks, particularly in stronger economies like the U.S., should stay strong and resist the pressure to ease tight inflation-curbing policies, the IMF warned.
Inflation worldwide is falling—from 9.2% last year to 5.9% this year to a predicted 4.8% next year—the IMF said, largely due to falling energy and food prices, though most countries are still not expected to return inflation to target levels until 2025.
While its global predictions were largely unaltered, the IMF upgraded its outlook for the United States, forecasting economic growth of 2.1% for this year and 1.5% for next year, respectively up 0.3 and 0.5 percentage points from July. Gourinchas said a “soft landing” is considered more likely here, with inflation likely being tackled without precipitating a major downturn. Unemployment forecasts for the U.S. are now increasing by a “modest” 3.6% and 3.9% by 2025, the IMF said.
Gourinchas highlights China’s looming real estate crisis, severe banking instability and volatile commodity prices amid “climate and geopolitical shocks” as serious risks to efforts to curb inflation. The economist pointed to surging oil prices following supply cuts between June and September and elevated food prices disrupted from Russia’s war in Ukraine as two examples of how this has happened in the past, with both underlying issues yet unresolved.
The report was produced and finalized before Hamas attacked Israel over the weekend and the new war could have broad ramifications for the regional and global economy. Its impact, and whether the fighting may spread to the wider region (a key oil producing area), remains to be seen. Gourinchas told Reuters it was too early to say how the escalation would affect the global economy. "Depending how the situation might unfold, there are many very different scenarios that we have not even yet started to explore, so we can't make any assessment at this point yet."