The US economy is set to experience stronger growth this year than initially expected, as outlined by the International Monetary Fund (IMF). However, China prepares for a possible slowdown, and the commodity markets are under threat from rising geopolitical tensions. The IMF reported its predictions on Tuesday. For 2024, the agency maintains its global real gross domestic product growth forecast at 3.2%, consistent with its July assessment.
Notably, the outlook for the US has seen an upward adjustment of 0.2 percentage points to 2.8%. Last year, the IMF estimated global economic expansion at 3.3%, with the US growing at 2.9%. In a shift, the agency downgraded its growth projection for China in 2024 by 0.2 percentage points to 4.8%. This positive revision for the US can be attributed to 'stronger outturns' in both consumer spending and nonresidential investment.
The resilience of US consumption has been attributed primarily to significant increases in real wages. Meanwhile, China continues to grapple with persistent weaknesses in its real estate sector and a decline in consumer confidence, although net exports have fared better than anticipated according to the report. Recently, the Federal Reserve’s updated summary of economic projections revealed a downward adjustment to the US growth outlook for 2024, reducing it to 2% from the previous estimate of 2.1%.
However, forecasts for 2025 and 2026 remain steady at 2% each. The IMF also raised its 2024 economic growth estimates for several countries, including the UK, Brazil, and Russia, while nations within the Euro Area, Japan, and Mexico faced downgrades. For 2025, the global real GDP growth projection is 3.2%, which is a slight decline of 0.1 percentage points from the previous outlook, with the US estimate upgraded by 0.3 percentage points to 2.2%. Global headline inflation is predicted to reach 3.5% in the last quarter of the upcoming year, slightly under the average rates recorded during the twenty years preceding the COVID-19 pandemic.
According to Pierre-Olivier Gourinchas, Economic Counsellor at the IMF, there are indications that "the battle against price growth has largely been won." Gourinchas emphasized that "the global economy exhibited unusual resilience throughout the disinflationary process," noting that the reduction in inflation without triggering a global recession is a considerable accomplishment. Nevertheless, inflation rates in services are still nearly double what they were before the pandemic.
Economic risks are intensifying due to potential supply disruptions linked to various factors, including climate change, health uncertainties, and geopolitical tensions. Gourinchas cautioned, "An escalation in regional conflicts, particularly in the Middle East, could pose serious threats to commodity markets.
Furthermore, monetary policy might remain overly restrictive for an extended period, and global financial conditions could tighten abruptly." Looking ahead, five years from now, global economic growth is anticipated to settle at 3.1%, marking the lowest predictions in decades. Gourinchas attributes much of this downturn to China's subdued outlook, while medium-term economic perspectives for other regions, such as Latin America and the European Union, have also worsened..