Global Growth Slows Amidst Divergence: IMF’s Forecast

The International Monetary Fund (IMF) has projected a slowdown in global economic growth, with forecasts pointing to a 3% growth rate for this year and a further dip to 2.9% in 2024.

These revelations were made by Pierre-Olivier Gourinchas, head of the Fund’s Research Department, during a press briefing ahead of the launch of the World Economic Outlook (WEO) on Tuesday in Marrakech, Morocco.

Gourinchas highlighted the widening divergence in growth trends among nations, stating that the United States and large emerging markets are expected to experience stronger growth, while China and the Euro-area face downward revisions.

The IMF’s Chief Economist noted a decline in headline inflation from 6.8% this year to 5.7% next year, with core inflation also set to decrease, albeit less significantly.

However, fears of a widespread recession seem to be subsiding, as the quarterly WEO report indicates an increased likelihood of a soft landing.

Gourinchas attributed the divergence in economic performance to three main factors: a softening demand for services, varying exposure to energy price shocks, and differing points in tightening cycles among countries.

Despite the improved outlook, Gourinchas cautioned that risks persist, particularly related to China’s economic slowdown due to stress in the real estate sector and potential volatility in commodity prices amidst climate and geopolitical shocks.

The IMF’s report offered recommendations for central banks, emphasizing the importance of maintaining price stability and tailoring monetary policies to individual countries’ recovery speeds.

It also encouraged fiscal policy measures aimed at rebuilding buffers, phasing out untargeted subsidies, and implementing reforms to reduce structural impediments to growth.

Furthermore, the WEO report called for global cooperation to counter geoeconomic fragmentation, advocating for the establishment of a robust global financial safety net with adequate resources for the IMF to address shared challenges such as climate risks, food and energy security, trade tensions, and geoeconomic fragmentation.

As the world navigates these economic challenges, the call for coordinated action and a strengthened international financial safety net remains pivotal for achieving stability and sustainable growth on a global scale.