Buildings in the Lujiazui Financial District in Pudong, Shanghai, China, Monday, January 29, 2024.
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The International Monetary Fund on Tuesday revised up its forecast for global economic growth, citing unexpected strength in the U.S. economy and China’s fiscal support measures.
Currently, the global growth rate in 2024 is 3.1%, an increase of 0.2 percentage points from the previous forecast in October, and is expected to continue expanding at 3.2% in 2025.
Large emerging market economies, including Brazil, India and Russia, are also doing better than previously thought.
The IMF says the likelihood of a so-called “hard landing” – an economic contraction after a period of strong growth – is now reduced, despite new risks from rising commodity prices and supply chain issues due to geopolitical changes in the Middle East. I think that I am doing it.
This year’s growth is expected to be 2.1% in the US, 0.9% in the euro area and Japan, and 0.6% in the UK.
IMF Chief Economist Pierre-Olivier Grinchat told CNBC’s Karen Tso on Tuesday: “What we saw was a very resilient global economy in the second half of last year that will carry over into 2024. It will happen,” he said.
“This is a combination of strong demand, private consumption and government spending in some of these countries. But also, and this is very important in the current context, the supply component as well…very strong labor “Friction is easing in markets and supply chains, and energy and commodity prices are falling.”
The U.S. economy grew 3.3% in the fourth quarter, beating economists’ expectations, according to the latest official figures.
China has faced a number of challenges over the past year, including a disappointing recovery in spending after the pandemic, concerns about deflation and an ongoing real estate sector crisis. In response, the government launched a number of economic stimulus measures, contributing to the IMF’s upgrade.
However, the IMF’s forecast remains below the average global growth rate of 3.8% between 2000 and 2019. The agency said rising interest rates, the suspension of some fiscal support programs and weak productivity growth continued to weigh on it.
But restrictive monetary policy has caused inflation to fall faster than expected in most regions, which Grinchat called “another piece of good news” in his report on Tuesday. The IMF expects global inflation to reach 5.8% in 2024 and 4.4% in 2025. In developed countries, it will fall to 2.6% this year and 2% next year.
“The war on inflation is being won and a soft landing is becoming more likely. This sets the stage for central banks, the Federal Reserve, the European Central Bank, the Bank of England and others to begin easing.” “Once we know for sure that the economy is on its way, we will raise interest rates,” Grinchas said.
“The current prediction is that central banks will be waiting to get a little more data. Central banks are meeting meeting after meeting and relying on data to make sure we’re on the path. “We have confirmed that. This is the baseline. And if we do that, we will see a rate cut by the second half of this year,” he continued.
Grinchas said central banks should not ease too much too soon, but if excessively tight policies continue for too long, there is a risk that growth in developed countries could slow and inflation could fall below 2%. He added that