by David Lawder
WASHINGTON (Reuters) – The International Monetary Fund (IMF) on Tuesday raised its growth forecasts for the United States, the United Kingdom and France in 2024, while lowering those of China, Germany and the euro zone, warning that the risks linked to armed conflicts, trade disputes and the consequences of a restrictive monetary policy were numerous.
The IMF’s latest World Economic Outlook leaves the forecast for global gross domestic product (GDP) growth in 2024 unchanged from the 3.2% forecast in July.
The forecast reflects sluggish global economic growth at a time when financial leaders from around the world are in Washington for IMF and World Bank meetings this week.
Global growth is expected to stand at 3.2% in 2025, compared to 3.3% forecast in July, while medium-term growth is expected to ease to a “mediocre” level of 3.1% in five years, although -below its pre-pandemic trend, the report shows.
However, IMF chief economist Pierre-Olivier Gourinchas said the United States, India and Brazil were showing resilience and had achieved a “soft landing” with a slowdown in inflation without massive job losses.
“It appears that the global battle against inflation has been largely won, even if price pressures persist in some countries,” Pierre-Olivier Gourinchas said in a blog post published Tuesday.
He told Reuters in an interview that there is nevertheless a risk that monetary policy could become “mechanically” too tight without lowering interest rates in some countries as inflation falls, weighing on growth and job.
“Right now, our assessment of monetary policy in most countries is about where we want to see it continue, but if inflation continues to fall, central banks need to start paying attention to what’s happening. goes to the side of activity,” he warned.
SOLID CONSUMPTION
The IMF raised its growth forecast for the US economy in 2024 from 2.6% to 2.8%, mainly due to stronger-than-expected consumption, supported by rising wages and asset prices.
The institution also raised its forecast for US GDP growth for 2025 to 2.2%, compared to 1.9% forecast in July, which slightly delays the return to trend growth.
In Brazil, the IMF now says it expects growth of 3% in 2024, an upward revision of 0.9 percentage points compared to the previously announced estimate, thanks also to the strength of private consumption and investments.
The IMF further reduced the expected growth rate in China in 2024 from 5% to 4.8%, with continued weakness in the real estate sector and consumer confidence outweighing the rise in net exports.
On the other hand, growth forecasts for the Asian giant in 2025 remain unchanged at 4.5%, but they do not take into account the impact of the fiscal stimulus plans recently announced by Beijing, which still largely remain to be defined.
Germany, the euro zone’s largest economy, will record zero growth this year, compared with a 0.2% rise in the previous estimate, due to continued difficulties in its manufacturing sector, the report showed.
This downward revision contributed to a slight lowering of expected growth for the euro zone in 2024 from 0.9% to 0.8% and from 1.5% to 1.2% in 2025, despite the increase in 0.5 point of the growth estimate for Spain at 2.9%.
The outlook for French GDP growth this year was also raised from 0.9% to 1.1%, the report shows.
The IMF is now more optimistic for the UK than in July, forecasting GDP growth of 1.1% in 2024, up from 0.7% previously, falling inflation and interest rates. interest to stimulate consumer demand.
COMMERCIAL RISKS
The IMF also noted that a number of risks weigh on the forecast, including the possibility of large tariff increases and retaliatory trade measures.
The institution does not mention the promise of the Republican candidate for the presidency of the United States, Donald Trump, to impose customs duties of 10% on imports to the United States and 60% on goods from from China.
Instead, the report contains a downside scenario that includes 10% tariffs in both directions between the United States, the Eurozone and China, plus 10% US tariffs on the rest of the world, a reduction in migration to the United States and Europe and financial market turmoil that tightens financial conditions.
If this happened, it would reduce the output level of overall global GDP by 0.8% in 2025 and 1.3% in 2026, according to the IMF.
Other risks outlined in the report include the possibility of a spike in oil and other commodity prices if conflicts in the Middle East and Ukraine worsen.
The IMF also warned countries against implementing industrial policies aimed at protecting domestic industries and workers, saying they often fail to bring about lasting improvements in living standards.
“Economic growth must instead come from ambitious national reforms that stimulate technology and innovation, improve competition and resource allocation, deepen economic integration and stimulate productive private investment,” recommended Pierre-Olivier Gourinchas .
(Reporting David Lawder; Diana Mandiá; editing by Augustin Turpin)
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