IMF predicts slightly slower global growth in 2024 and 2025

A view of the International Monetary Fund headquarters building in Washington, DC on October 20, 2024 ahead of the 2024 IMF/World Bank Annual Meetings. (Photo by Tierney CROSS / AFP)

Washington, United States — Global growth is expected to ease slightly to 3.2 percent this year and remain at that level in 2025, the IMF announced Tuesday, while warning that the stable figures masked “important” regional and sectoral shifts.

In its new World Economic Outlook (WEO) report, the International Monetary Fund also estimates that global inflation will continue to ease, hitting 5.8 percent this year, before falling to 4.3 percent in 2025.

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“We are seeing inflation moving in the right direction without a major slowdown in economic growth or a global recession,” IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview ahead of the report’s publication.

“In our baseline analysis, in advanced economies (inflation) will be back at central bank targets in 2025,” he continued, adding it would take “a little bit longer” for emerging markets.

The Fund’s WEO report noted that global growth is expected to trend to a lackluster 3.1 percent by 2029, and warned of growing risks to that metric.

Beneath the relatively calm outlook for growth through 2025, “the picture is far from monolithic,” the Fund said, warning of “important sectoral and regional shifts” taking place over the past six months.

The WEO’s publication comes a day after the IMF and World Bank Annual Meetings got underway in Washington, bringing together finance ministers and central bankers from around the world for meetings on the health of the global economy.

Strong growth in US

The report finds that the United States has remained an engine of global growth — in sharp contrast with the euro area, where expansion remains slow.

The world’s largest economy is now expected to grow by 2.8 percent this year, down ever-so-slightly from the 2.9 percent seen in 2023, but still a shade better than the Fund’s previous estimate in July.

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It is then expected to ease somewhat to 2.2 percent in 2025 — up 0.3 percentage points from July — as fiscal policy is “gradually tightened and a cooling labor market slows consumption,” the IMF said.

“The US economy has been doing very well,” Gourinchas said, pointing to strong productivity growth and the positive effects of a surge in immigration on economic growth.

He added that the United States is “very close” to achieving a soft landing — a rare feat in monetary policy, where inflation falls to within targets without spurring a severe recession.

In Europe, growth is still trending higher, but remains low by historical standards, and is on track to be at an anemic 0.8 percent this year, rising slightly to 1.2 percent in 2025.

While France and Spain saw upgrades in their outlook for 2024, the IMF cut its projections for German growth by 0.2 percentage-points this year, and by half a percentage-point next year, citing its “persistent weakness in manufacturing.”

There was some good news in the United Kingdom, where growth is projected to accelerate in both 2024 and 2025, “as falling inflation and interest rates stimulate domestic demand.”

China and India slow

Growth in Japan is expected to slow sharply to just 0.3 percent this year, before accelerating to 1.1 percent next year, “boosted by private consumption as real wage growth strengthens,” according to the IMF.

The Fund expects the growth in economic output in China to continue to cool, easing from 5.2 percent last year to 4.8 percent this year, and then falling further to 4.5 percent in 2025.

“Despite persisting weakness in the real estate sector and low consumer confidence, growth is projected to have slowed only marginally,” the IMF said, pointing to “better-than-expected” net exports from the world’s second-largest economy.

The slowdown in India looks set to be more pronounced, with the IMF penciling in growth of 7.0 percent this year, down from 8.2 percent in 2023.

It is then set to slow even further to 6.5 percent, as the “pent-up demand accumulated during the pandemic” runs out, the IMF said.

The IMF expects growth in the Middle East and Central Asia to pick up slightly to 2.4 percent this year, before jumping to 3.9 percent in 2025 as the temporary effect of oil and shipping disruptions fade.

And in Sub-Saharan Africa, the IMF predicts that growth will remain unchanged at 3.6 percent this year, rising to 4.2 percent in 2025 as weather shocks abate and supply constraints ease.