People assembled outside the World Bank headquarters on Monday in Washington, DC, as the IMF/World Bank meetings commenced. — AFP

Global growth is anticipated to decelerate slightly to 3.2 percent this year and remain at that level in 2025, according to the IMF's Tuesday announcement. The stable figures, however, conceal "important" regional and sectoral shifts. In its latest World Economic Outlook (WEO) report, the International Monetary Fund also forecasts that global inflation will continue to ease, reaching 5.8 percent this year before dropping to 4.3 percent in 2025.

"We are observing inflation moving in the right direction without a significant slowdown in economic growth or a global recession," IMF chief economist Pierre-Olivier Gourinchas told AFP ahead of the report's release. "In our baseline analysis, in advanced economies (inflation) will return to central bank targets in 2025," he added, noting that it would take "a bit longer" for emerging markets.

The IMF's WEO report highlights that global growth is expected to trend towards a lackluster 3.1 percent by 2029, with growing risks to this metric. Beneath the seemingly calm growth outlook through 2025, "the picture is far from uniform," the Fund warns, citing "important sectoral and regional shifts" over the past six months.

The WEO's release follows the IMF and World Bank Annual Meetings in Washington, which brought together finance ministers and central bankers to discuss the global economy's health. The report indicates that the United States continues to drive global growth, in stark contrast to the euro area, where expansion remains sluggish.

The world's largest economy is projected to grow by 2.8 percent this year, slightly down from 2.9 percent in 2023, but still marginally better than the IMF's previous estimate in July. It is then expected to ease to 2.2 percent in 2025—up 0.3 percentage points from July—as fiscal policy tightens and a cooling labor market slows consumption, according to the IMF.

"The US economy has performed exceptionally well," Gourinchas said, attributing this to robust productivity growth and the positive impact of increased immigration. He added that the United States is "very close" to achieving a soft landing—a rare outcome in monetary policy where inflation falls within targets without triggering a severe recession.

In Europe, growth is gradually improving but remains historically low, expected to be at 0.8 percent this year and rising slightly to 1.2 percent in 2025. While France and Spain saw upgrades in their 2024 outlook, the IMF reduced its German growth projections by 0.2 percentage points this year and by half a percentage point next year, citing persistent manufacturing weakness.

There was some positive news for the United Kingdom, where growth is expected to accelerate in both 2024 and 2025 as inflation and interest rates decline, stimulating domestic demand. Japan's growth is forecast to slow sharply to 0.3 percent this year before accelerating to 1.1 percent next year, boosted by strengthening real wage growth.

The IMF expects China's economic output growth to continue cooling, from 5.2 percent last year to 4.8 percent this year and further to 4.5 percent in 2025. Despite weaknesses in the real estate sector and low consumer confidence, growth is projected to slow only marginally, with better-than-expected net exports.

India's slowdown is expected to be more pronounced, with growth projected at 7.0 percent this year, down from 8.2 percent in 2023, and further slowing to 6.5 percent as pandemic-related pent-up demand dissipates.

The IMF anticipates growth in the Middle East and Central Asia to rise slightly to 2.4 percent this year, before jumping to 3.9 percent in 2025 as oil and shipping disruptions wane. In Sub-Saharan Africa, growth is expected to remain at 3.6 percent this year, rising to 4.2 percent in 2025 as weather shocks and supply constraints ease.

Source link:   https://www.khaleejtimes.com