The International Monetary Fund (IMF) has revised its global growth forecast for 2024 to 3.1 percent, citing the resilience of major advanced and emerging economies worldwide. In its updated data from the World Economic Outlook Update for January 2024, the IMF predicts a growth rate of 3.1 percent for this year, compared to the previously expected increase of 2.9 percent stated in the October report. The United States (U.S.), China, India, Russia, and Mexico were specifically highlighted as countries experiencing notable reassessments.
IMF Chief Economist Pierre-Olivier Gourinchas, speaking before the report’s publication, mentioned that there was less inflation and greater growth observed not only in the U.S. but also in many other countries. He pointed out examples such as China, Russia, Brazil, and India, which displayed significant resilience in their economies last year and are expected to continue in 2024.
Despite the upward revision in growth expectations, global growth is projected to remain below its historical average of 3.8 percent for this year and the next. This is due to various factors, including the ongoing effects of interest rate hikes, the withdrawal of government support associated with the COVID-19 pandemic, and the sustained decline in productivity levels.
Read more: IMF urges GCC countries to further enhance non-oil sector growth
Downside risks
The Fund cautioned that achieving hopeful growth would be challenging if the monetary situation prolongs, primary commodity prices surge again due to geopolitical shocks (such as ongoing attacks in the Red Sea), supply disruptions, longer-lasting core inflation, or worsening conditions in China’s real estate sector.
The continuation of attacks in the Red Sea, a crucial trade route responsible for 11 percent of global trade traffic, and the ongoing conflict in Ukraine pose risks of adverse shocks to global supply chains. These shocks could lead to significant increases in food, fuel, and transportation costs. Additionally, the escalation of the conflict between Gaza and Israel could impact the broader region, which accounts for approximately 35 percent of the world’s oil exports and 14 percent of its gas exports. The Fund noted that container shipping costs have already risen sharply, and the situation in the Middle East remains volatile. Increased geo-economic dispersion could also impede cross-border flows of primary goods, resulting in further price volatility.
Another downside risk highlighted by the IMF is the persistence of core inflation, which may necessitate tighter monetary policy and tighter global fiscal conditions. This could lead to capital flight towards safer destinations, a stronger dollar, and negative consequences for trade and growth.
In addition to these risks, China’s growth is deemed destabilizing as real estate investment falls short of expectations.
The IMF maintains its expectations of global inflation decreasing to 5.8 percent in 2024, with a further decline to 4.4 percent in 2025. The declining inflation and steady growth are seen as paving the way for a gradual decline.
Growth in the eurozone
While many Asian economies continue to improve, Europe still has a significant influence on the global outlook. The IMF points out “remarkably weak growth in the eurozone.” Germany’s economy is expected to exhibit the slowest growth among the G7 countries, with a projected increase of just 0.5 percent this year following a contraction of 0.3 percent in 2023. Similarly, Britain, France, and Italy are expected to achieve growth rates of 1 percent or lower, while Spain’s economy is anticipated to fare slightly better with 1.5 percent growth. The IMF attributes the weak growth in the eurozone to weak consumer confidence and the ongoing impact of rising energy prices.
Nevertheless, the overall outlook for 2024 appears less gloomy than expected for many countries, with the IMF forecasting positive growth for all countries except Argentina this year.
In the Middle East and Central Asia region, the Fund projects an increase in growth from 2 percent in 2023 to 2.9 percent in 2024 and 4.2 percent in 2025. These figures represent a downward revision of 0.5 percent for 2024 and 0.3 percent for 2025 compared to the October 2023 forecasts.
Moreover, the IMF projected the U.S. economy to experience a decline in growth from 2.5 percent in 2024 to 2.2 percent in 2025.
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