Growth forecast for 2024 | IMF confirms its expectations for the global economy

(Washington) The International Monetary Fund (IMF) on Tuesday maintained its forecast for global growth for 2024 unchanged at 3.2%, anticipating in particular an improvement in growth in China and India, but confirming previous expectations for advanced economies.

For the third and final update of its annual World Economic Outlook (WEO), the IMF indicated that it still expects growth of 3.2% for 2024, slightly improving its forecast for 2025 to 3.3% (+0.1 percentage point).

The Fund had already revised its forecasts for the current year twice, slightly upwards each time, since the publication of the initial version of the report last October.

Despite everything, global growth remains on a historically low medium-term trend, barely above 3.2% for two years and for the coming years on average, far from the 3.8% observed over the period 2000 to 2019, and even more so over the last century.

“We have two areas of concern,” warned the IMF’s chief economist, Pierre-Olivier Gourinchas, interviewed by AFP.

“One concerns the budgetary trajectory of a number of countries where public finances have been under great strain […]the second concerns industrial and commercial policies, the risk of geoeconomic fragmentation,” he detailed.

According to the Fund’s chief economist, this fragmentation is materialized by the multiplication of protectionist regulations throughout the world, which are increasing sharply.

“We are seeing an explosion in the number of restrictive measures. 3,000 measures were put in place last year, compared to more than a thousand in 2019 or 2020, which was already a high level,” Gourinchas stressed at a press conference.

While trends remain diverse among the world’s major economies, the Washington-based institution highlights a convergence of medium-term prospects among advanced economies, due to a gradual slowdown in the US economy combined with a recovery in the European economy from 2025.

In 2024, however, the gap should remain significant, with growth still forecast at 2.6% for the United States, a slight decline (0.1 percentage point) compared to the previous estimate, against only 0.9% for the eurozone (+0.1 point compared to March).

For the world’s largest economy, “our projection does not vary enormously and we do not expect a huge variation in the event of a rate cut. We only anticipate a cut in 2024, which will continue in 2025,” with an impact that will be felt later, Mr. Gourinchas stressed.

Persistent risks in China

In Europe, the IMF points out that signs of an economic recovery are multiplying, particularly in the services sector. This is materialising unevenly, however, with forecasts for the German economy remaining unchanged, and weak, at 0.2% growth, while they are improving elsewhere.

This is particularly true for Spain, which sees its forecast raised by 0.5 percentage points, with growth expected at 2.4%, after reaching 2.5% in 2023, remaining among the best performing European economies.

“We are seeing signs of recovery, all the more visible if we compare quarter to quarter. In particular thanks to the catch-up of real wages. Activity remains stronger in services than in industry, which means that countries that rely on the latter, such as Germany, are a little behind,” explained Mr. Gourinchas.

French growth is also revised slightly upwards, by 0.2 points, to 0.9%, now placing the IMF estimate between that of the Bank of France (0.8%) and that of INSEE (1.1%). It does not take into account the result of the legislative elections.

On the emerging countries side, the Fund is more optimistic than last March, particularly for China and India, which both see their growth revised upwards, while their economies remain supported by domestic demand and an increase in exports.

For China, the revision is 0.4 points, with growth now expected at 5%, while that of India should reach 7%, improved by 0.2 points.

“We are revising our projections for China, but we also point to a risk, with confidence remaining low and the problems in the real estate sector not being resolved. If domestic demand weakens, China will rely even more on its exports. In the current environment, this could be a problem,” said the Fund’s chief economist.

Conversely, the South American economies of Brazil and Mexico could perform less well than initially expected, while the forecast for Russia remains unchanged at 3.2% for this year.