Global Economy Faces Risks Despite Stable Growth
The International Monetary Fund (IMF) has lowered its 2024 global economic growth forecast, to 3.2%, and adjusted regional outlooks. The US saw an upgraded projection to 2.8%, driven by robust consumer spending due to rising wages and asset prices. Brazil also received a notable boost to 3.0%, while China’s forecast reduced to 4.8%, reflecting weakness in its property sector and low consumer confidence.
The eurozone faces significant challenges, especially Germany, which is now projected zero growth due to struggles in its manufacturing sector. Consequently, the overall eurozone forecast was downgraded to 0.8%. In contrast, the UK received encouraging news with an upward revision to 1.1% growth, while Japan’s outlook was reduced to just 0.3%. India remains a standout, holding firm at a strong 7.0% growth forecast for 2024.
IMF Chief Economist Pierre-Olivier Gourinchas noted that the global battle against inflation has largely been won, though some countries continue to experience price pressures. He warned that monetary policy may become excessively restrictive unless interest rates adjust as inflation declines.
Ahead of the 2024 US presidential election, the IMF issued a warning about the risks of rising protectionism, particularly as candidates propose increased tariffs. It cautioned that these policies could harm both the US and global economies, stressing the need for a more cooperative international trade environment. The organisation cautions that increased trade barriers could severely impact economic growth, predicting a potential drop in global output by 0.8% in 2025 and 1.3% in 2026 if higher tariffs significantly affect world trade.
Looking ahead, the IMF predicts global growth will stabilise at a "mediocre" 3.1% over the next five years, which is below pre-pandemic levels. The organisation urged governments to avoid protectionist policies, advocating instead for reforms that encourage innovation, competition, and productive private investment.
If you would like to receive The Daily Update to your inbox, please email markets@epicip.com or click the link below.