by David Lawder

WASHINGTON (Reuters) – The global economy is expected to experience another year of moderate growth, supported by U.S. activity as the impacts of a period of high inflation, weak demand in China and Europe and two wars continue to put pressure on activity, the International Monetary Fund (IMF) said on Tuesday.

In its quarterly Global Economic Outlook report, the IMF forecasts real global GDP growth of 3.2% in 2024 and 2025, the same rate as in 2023. The forecast for 2024 has been revised upwards from 0. 1 percentage point from the January forecast, largely due to the significantly improved U.S. economic outlook.

“The global economy seems quite resilient to us,” IMF chief economist Pierre-Olivier Gourinchas told journalists, also stressing that several countries had escaped recession despite interest rate increases.

Inflation continues to decline, the pace of which has slowed in recent months, particularly in the United States where the latest data shows that demand is robust, continued the chief economist.

“We still expect to see inflation continue to fall this year, which would allow the Federal Reserve to be able to start lowering rates, perhaps not as quickly as the markets expected,” Pierre-Pierre told Reuters. Olivier Gourinchas.

The IMF also notes that the impacts of the COVID-19 pandemic and the cost of living crisis have been less persistent than expected in many countries, which have seen activity return to its pre-pandemic level. faster than expected.

The IMF forecasts growth in the American economy of 2.7% in 2024, compared to 2.1% forecast in its January projections, as consumer spending and the job market performed better than expected. The effects of monetary tightening would begin to be felt late in 2025, with growth expected to decline to 1.9%, compared to 1.7% estimated in January.

The American economy is an exception: the growth forecast for the euro zone was lowered from 0.9% to 0.8% for 2024, with consumer morale remaining low in Germany and France.

The IMF forecasts growth of 0.7% in France this year, compared to 1.0% previously and a target of 1% set by the government. For 2025, the growth forecast is 1.4%.

In Germany, the IMF expects growth of 0.2% in 2024, compared to 0.5% previously, and 1.3% next year.

The UK saw its growth forecast for this year cut by 0.1 point to 0.5% as inflation and high rates stifle activity.

CHINESE REAL ESTATE

The IMF has kept its growth forecast for China unchanged in 2024 at 4.6%, a rate which is expected to fall to 4.1% in 2025. Without a plan to restructure the domestic real estate sector, China faces a slowdown. even more marked by its demand and its economy, warned the IMF.

Such a situation would add to the deflationary pressures that China is experiencing, and which has led to an increase in exports of cheap manufactured goods which raises fears of a response from trading partners – the American Treasury Secretary, Janet Yellen, having notably mentioned the implementation place trade barriers for certain goods this month.

Unviable developers must exit the market, incomplete real estate projects must be completed, and demand from vulnerable households supported to restore Chinese consumption, the IMF recommends.

The Fund nevertheless emphasizes that some emerging economies should perform well. Brazil’s growth was revised up 0.5 points to 2.2% in 2024, while India’s growth was revised up 0.3 points to 6.8%.

Emerging G20 economies are taking a larger share of global trade, a share set to grow, according to the IMF.

Developing countries continue to absorb the fallout from the pandemic, most persistent in these smaller economies. Economic activity in developing countries is expected to grow 4.7% in 2024, compared to 4.9% growth forecast in January.

RUSSIAN RESISTANCE

One of the main surprises in the report is the revision of Russia’s growth outlook for 2024, raised to 3.2% compared to 2.6% expected in January.

Revenues from oil exports, strong government spending and war-related investment as well as higher consumer spending amid tight labor markets explain this improved outlook. In 2025, the Russian economy is expected to grow by 1.8%, compared to 1.1% expected in January.

Growth in Ukraine, very dependent on Western aid, is expected to slow to 3.2% in 2024 before rebounding to 6.5% in 2025.

In the Middle East, the costs linked to tensions on supply chains were “moderate”, noted Pierre-Olivier Gourinchas, adding that the IMF was “worried about a potential escalation”.

(Report by David Lawder, by Corentin Chappron, edited by Blandine Hénault)

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