IMF Updates Global Forecast for 2024; India Is Still a Bright Spot

It’s not only a US narrative. IMF Chief Economist Pierre-Olivier Gourinchas noted that “there was a lot of resilience in many, many parts of the world in the last year and going into 2024,” citing nations including China, Russia, Brazil, and India

Washington: Citing unexpected “resilience” in significant advanced and emerging market economies worldwide, the IMF reported on Tuesday that it has increased its prediction for global growth in 2024 to 3.1%.

The revised estimate, which was disclosed in the most recent World Economic Outlook (WEO) report, is 0.2 percentage points higher than the IMF’s earlier October prediction.

Prior to the release of the report, Pierre-Olivier Gourinchas, the chief economist at the IMF, stated to reporters, “We had simultaneously less inflation and more growth.”

This is not a US-only tale. He mentioned China, Russia, Brazil, and India as examples of the resilient nations that demonstrated a great deal of fortitude in the past year and into 2024.

Notwithstanding the improvement, it is anticipated that this year and the following year’s worldwide growth will fall short of the recent historical average of 3.8% because of the ongoing effects of high interest rates, the removal of government assistance associated to the pandemic, and chronically poor productivity levels.

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Of the advanced economies in the Group of Seven (G7), growth in Europe is predicted to continue to be sluggish due to persistent problems, while growth in Japan and Canada is anticipated to be marginally better.

The IMF kept its 5.8% forecast for global inflation in 2024, but this hides a big underlying shift in the relative wealth of richer and poorer nations.

While emerging and developing economies are predicted to see annual inflation of 8.1%, up 0.3 percentage points, advanced economies are now predicted to see 2.6% inflation in 2024, down 0.4 percentage points from October.

Much of the surge can be ascribed to the ongoing problems in Argentina, where consumer price increases in the midst of an ongoing economic crisis last year approached 200 percent.

China and the US boost growth

The growth outlooks for the two largest economies in the world, China and the United States, were both significantly upgraded for 2024, putting them on pace for a less severe slowdown than the IMF had previously predicted.

The US economy is predicted by the IMF to grow by 2.1% in 2024, the year of the presidential election in which Joe Biden is running for a second term. This is a minor decrease from the 2.5% growth predicted in 2023.

According to the IMF, this is mostly because of “statistical carryover effects from the stronger-than-expected growth outcome for 2023.”

In the meantime, China’s GDP is expected to rise by 4.6% this year, down from 5.2% the previous year.

The “difficulties” in the property industry are not having the severe impact as the IMF had predicted, and there is also “significant fiscal support coming from the authorities,” according to Gourinchas, which explains the better-than-expected growth results.

India is a bright spot in the global economy; the IMF revised its growth forecast for this year to 6.5%, up 0.2 percentage points from October, after estimating 6.7% growth in 2023.

Additionally, the Fund raised Brazil’s, Russia’s, and Iran’s growth projections for the upcoming year.

There are still issues in Europe.

Even if the economies of many Asian countries are still growing, Europe’s continued influence on the world economy is concerning. The IMF has noted that “notably subdued growth in the euro area.”

Germany’s GDP is predicted to grow at the weakest rate among the G7 economies once more, by just 0.5% this year after falling by an anticipated 0.3% in 2023.

While Spain’s economy is predicted to fare slightly better, rising by 1.5%, the United Kingdom, France, and Italy are all likely to enjoy growth of 1.0 percent or less this year.

The sluggish growth in the euro area is due to “weak consumer sentiment, the lingering effects of high energy prices, and weakness in interest-rate-sensitive manufacturing and business investment,” according to the IMF’s WEO report.

The general prognosis for many countries in 2024 appears to be less bleak than it was in 2024, notwithstanding some difficult forecasts: With the exception of Argentina, every nation listed in the WEO study is expected to expand positively this year.

This is a step up from 2023, when the IMF estimates that four of the 30 economies included in the report would have shrunk.