IMF

The IMF raised its forecast for global growth Tuesday in Washington, DC but warned in its World Economic Outlook report that inflation and geopolitical risk remain threats to the world economy. 

“The global economy continues to display remarkable resilience, with growth holding steady and inflation declining. But many challenges still lie ahead. Global growth was 3.2% in 2023 and is expected to remain at that level, both in 2024 and 2025. This represents a 0.3 percentage point upgrade from our October projections for 2024, with stronger activity than expected in the U.S., China and other large emerging markets. But weaker activity in the Euro-area,” said IMF chief economist Pierre-Olivier Gourinchas at a news conference for the IMF and World Bank Spring Meetings.

Concerns over inflation, and the economic impact of the instability in the Middle East and war in Ukraine on the world economy are front and center for policy makers in their meetings.

“Somewhat worryingly progress towards inflation targets as stalled since the beginning of the year in some countries. This could be a temporary setback, but there are reasons to remain vigilant. Oil prices have been rising in part due to geopolitical tensions and services. Inflation remains stubbornly high in many countries. Further trade restrictions could also push up goods inflation. Bringing inflation back to target should remain the priority,” said Gourinchas.

Markets have been wondering when or even if the US Federal Reserve may begin cutting rates after recent economic data shows a strong American economy.

“The strong recent performance of the United States reflects robust productivity growth, and growth in labor supply, but also strong demand pressures that could add to inflation. This calls for a cautious and gradual approach to easing by the Federal Reserve,” observed Gourinchas, head of Research Department at the Fund.

The report also noted that pandemic relief spending had left debt-to-GDP ratios elevated in much of the world. The IMF is urging countries to address this by rebuilding their fiscal buffers. But this sometimes is politically unpalatable in the short term.

“Fiscal consolidations are never easy, but it is best not to wait until markets dictate their conditions. Credible fiscal consolidations can help lower funding costs, improve fiscal headroom and financial stability. The key is to start early, gradually and credibly,”  said the IMF’s Economic Counselor.

A full schedule of events streaming to the public and media can be found at https://www.imfconnect.org/