IMF Raises Global Economic Growth Forecast for 2024

UPDATES WITH INFLATION DETAILS, ESTIMATES; REVISES DECK

By Ovunc Kutlu

The International Monetary Fund on Tuesday revised its global economic growth forecast for 2024 upwards to 3.2%, 0.1 percentage point higher than an earlier estimate from January.

Advanced economies are projected to expand 1.7% this year, according to its World Economic Outlook April report. The figure is a 0.2 percentage point upgrade from the January estimate of 1.5%.

“The pace of expansion is low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russia’s invasion of Ukraine; weak growth in productivity; and increasing geoeconomic fragmentation,” said the report.

The latest forecast for global economic growth five years from now on is at 3.1% – its lowest in decades, according to the financial agency.

The IMF warned that “geoeconomic fragmentation could intensify with higher barriers to the flow of goods, capital, and people implying a supply-side slowdown.”

Among advanced economies, the US economy is expected to grow 2.7% in 2024, up 0.6 percentage points from 2.1%.

The euro area’s growth forecast, however, was revised down to 0.8%, from 0.9%. Both growth estimates for Germany and France were revised down by 0.3 percentage points each, as they are expected to grow 0.2% and 0.7% this year, respectively.

Emerging market and developing economies’ growth estimate was revised up 0.1 percentage points to 4.2% from 4.1%.

While China’s growth forecast for 2024 was kept unchanged at 4.6%, India’s estimate was revised up 0.3 percentage points to 6.8%, and Russia’s was moved up 0.6 percentage points to 3.2%.

“In Türkiye, growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with economic activity strengthening in the second half of 2024 as monetary tightening ends and consumption starts to recover,” said the report.

Vigilance on inflation

“On a year-over-year basis, global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent,” said the report.

Global headline inflation is projected to fall from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, while advanced economies are expected to return to their inflation targets sooner than emerging market and developing economies, according to the IMF.

“While inflation trends are encouraging, we are not there yet. Somewhat worryingly, the most recent median headline and core inflation numbers are pushing upward. This could be temporary, but there are reasons to remain vigilant. Most of the progress on inflation came from the decline in energy prices and goods inflation below its historical average,” said the report.

“But services inflation remains high – sometimes stubbornly so – and could derail the disinflation path. Bringing inflation down to target remains the priority,” it added.

The IMF warned that real interest rates have increased even as inflation recedes, and sovereign debt dynamics have become less favorable, especially for highly indebted emerging markets, and advised that countries rebuild their fiscal buffers.

“As inflation converges toward target levels and central banks pivot toward policy easing in many economies, a tightening of fiscal policies aimed at curbing high government debt, with higher taxes and lower government spending, is expected to weigh on growth,” said the report.