2024-07-16 15:42:35
(WASHINGTON) The International Monetary Fund (IMF) on Tuesday kept its global economic growth forecast for 2024 unchanged at 3.2%, particularly expecting improved growth in China and India, but confirmed its previous expectations for developed economies.
In its third and final update of its annual World Economic Report (WEO), the IMF said it still expects economic growth to be 3.2% in 2024, slightly higher than 3.3% in 2025 (+0.1 percentage point).
The IMF has twice slightly raised its forecasts for this year since publishing the first edition of the report last October.
Nevertheless, global economic growth remains at a historically low medium-term trend, with an average growth rate of just over 3.2% over the two-year and next few years, far lower than the 3.8% observed between 2000 and 2019, and even more so in 2019. last century.
“One issue is the budget trajectory in some countries where public finances are very tight. […]and the second one involves industrial and commercial policies, geo-economic fragmentation risks,” he explained.
The IMF’s chief economist said the fragmentation was caused by a proliferation of protectionist regulations around the world, which were increasing dramatically.
“We are seeing a surge in the number of restrictive measures. Last year 3,000 measures were taken, and in 2019 or 2020 more than 1,000 measures were taken, which is already a high level,” Gurinchas stressed at a press conference.
Photo credit: Susana Vera, Reuters archive
Pierre Olivier Gurinchas
If trends between the world’s major economies remain divergent, the Washington-based institution highlights the convergence of medium-term prospects for developed economies due to a gradual slowdown in the United States and a recovery in Europe starting in 2025.
However, the gap will remain large by 2024, with the US still growing at 2.6%, slightly lower than previously estimated (0.1 percentage point), while the euro area will grow by only 0.9% (+0.1 percentage point compared to March).
For the world’s largest economy, “there is little change in our forecasts, and we do not expect a huge change following the rate cut. We expect a decline in 2024, which will continue until 2025, and “the impact will be felt later,” Mr. Gurinchas stressed.
The ongoing risk of China
In Europe, the IMF highlighted that signs of economic recovery are increasing, especially in the services sector. However, this is being achieved unevenly, with the forecast for the German economy remaining unchanged at a weak 0.2%, while other regions are improving.
This is particularly true for Spain, where the forecast was revised up by 0.5 percentage points to a projected growth rate of 2.4% in 2023, remaining one of the fastest growing and efficient economies in Europe.
“We are seeing signs of recovery, which are even more pronounced if we compare quarter by quarter. Especially due to the catch-up of real wages. Activity in the services sector remains stronger than in industry, which means that countries such as Germany that rely on the latter are lagging behind a little,” Mr Gourinchas detailed.
French economic growth was also slightly revised up by 0.2 percentage points to 0.9%, with the IMF now forecasting between the Banque de France (0.8%) and INSEE (1.1%). It does not take into account the results of the legislative elections.
As for emerging countries, the IMF is more optimistic than it was in March last year, especially for China and India, where growth was revised upwards while their economies remain supported by domestic demand and export growth.
Photo: VINCENT THIAN, File: AP
Taikoo Li Sanlitun shopping mall in Beijing, China.
For China, the revision was 0.4 percentage points, with growth now expected to be 5%, while India’s growth should reach 7%, an increase of 0.2 percentage points.
“We are reviewing our forecasts for China, but we also point to risks, with confidence still low and problems in the real estate sector remaining unresolved. If domestic demand weakens, China will become more dependent on exports. This might be a problem in the current environment,” said the IMF’s chief economist.
Conversely, South American economies, Brazil and Mexico, are likely to perform less well than initially expected, while the forecast for Russia remains unchanged at 3.2% for this year.
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