File photo: The International Monetary Fund logo is seen outside the headquarters building during the IMF/World Bank Spring Meetings in Washington, U.S., April 20, 2018.Photo: Yuri Gripas/Reuters
WASHINGTON (AP) — The International Monetary Fund has raised its outlook for the global economy this year, putting the world on track for a “soft landing” — one where inflation is contained and moderate but steady growth occurs without major economic pain. He said it seems like there are.
The IMF now expects global growth to be 3.2% this year, up a notch from the 3.1% it had predicted in January and in line with the pace of 2023. Moreover, in 2025 he predicts that for the third consecutive year he will see growth of 3.2%.
The IMF, a lender to 190 countries, said in its latest outlook that unexpectedly strong growth in the world's largest economy, the United States, is supporting global expansion. The IMF expects the U.S. economy to grow 2.7% this year, up from the 2.1% it expected in January and above the robust 2.5% growth in 2023.
Rapid price increases remain a hindrance around the world, but the IMF expects global inflation to fall from 6.8% last year to 5.9% in 2024 and 4.5% next year. Looking only at the world's developed countries, the group predicts that rising interest rates will cause inflation to fall from 4.6% in 2023 to 2.6% this year and 2% in 2025.
The US Federal Reserve, the Bank of Japan, the European Central Bank and the Bank of England have all significantly raised interest rates with the goal of bringing inflation down to around 2%. In the United States, year-on-year inflation has fallen sharply from a peak of 9.1% in summer 2022 to 3.5%. Still, U.S. inflation remains above the Fed's target level, and any interest rate cuts by the U.S. central bank are likely to be delayed.
WATCH: Minneapolis Fed president talks about rising inflation and timing for rate cuts
Globally, including in the United States, rising borrowing rates were widely expected to cause severe economic distress and even recession. But that's not happening. Growth and employment are holding up despite slowing inflation.
“The global economy continues to show remarkable resilience,” IMF chief economist Pierre-Olivier Grinchat told reporters on Tuesday. “Most indicators continue to point to a soft landing.”
Still, Grinchas said progress on combating inflation appears to have been “stagnant” so far this year, with the pace of price increases for services such as health care and auto repair proving particularly difficult.
The global economy has shown unexpected resilience, but not necessarily strength. Global economic growth averaged 3.8% from 2000 to 2019, far higher than the IMF's forecast of 3.2% for this year and next. A lid on the global growth outlook continues to be high interest rates, slowing productivity growth in many parts of the world and the end of government economic aid rolled out during the pandemic. This is what is happening.
The IMF says economic expansion could be undermined by continued negative effects from rising interest rates and geopolitical tensions, such as the Gaza war, which risks disrupting trade and raising energy and other prices. I'm warning you.
China, the world's second-largest economy, is struggling with a collapsing real estate market, weak consumer and business confidence, and rising trade tensions with other major countries. The IMF expects China's economy, which once regularly posted double-digit annual growth rates, to slow to 5.2% in 2023, 4.6% in 2024 and 4.1% next year.
Read more: How immigrant workers contributed to strong U.S. employment growth
But on Tuesday, the Chinese government reported that the country's economy expanded faster than expected in the first three months of this year due to policies aimed at boosting growth and boosting demand. Official data showed China's economy expanded at an annualized pace of 5.3% in the January-March period, faster than analysts' expectations of about 4.8%. Compared to the previous quarter, the economic growth rate was 1.6%.
Japan's economy, the world's fourth largest, lost third place to Germany last year, but its growth rate is expected to slow to 0.9% in 2024 from 1.9% last year.
Among the 20 countries that use the euro currency, the IMF forecasts growth of just 0.8% this year, which, while weak, is twice as large as the euro zone's expansion in 2023. The UK's economic development is expected to be gradual, with growth expected to rise from 0.1% last year to 0.5% in 2024 and 1.5% next year.
Among developing countries, India is expected to continue growing faster than China, but the world's fifth-largest economy is expected to slow its growth rate from 7.8% last year to 6.8% this year and 6.5% in 2025. right.
The IMF expects sub-Saharan Africa's growth rate to accelerate steadily but slowly, from 3.4% last year to 3.8% in 2024 and 4.1% next year.
In Latin America, the economies of Brazil and Mexico are expected to slow until 2025. Brazil is likely to be held back by high interest rates, and Mexico is likely to be held back by government budget cuts.
