More optimistic IMF improves global growth prospects this year

The global economy will grow 3.2% this year and the same next year, a sign of a “extraordinary resilience”, with an improvement in developed countries such as the United States and in emerging markets such as India and Brazil, the IMF.

The update of the outlook for the world economy includes few changes compared to the previous one, published in January.

“The global economy continues to show considerable resilience, with growth remaining stable and inflation declining, but many challenges remain.“, the chief economist of the International Monetary Fund told reporters, Pierre-Olivier Gourinchas.

“The road has been bumpy”, due to problems in the supply chain, a war in Ukraine that triggered an energy and food crisis and a rise in inflation, followed by a rise in interest rates, explains the IMF.

But “Despite many gloomy predictions, the world avoided recession“, Add.

And despite high rates and inflation that varies from one country to another (close to the target in Europe, low in China but still too high in the United States), the world economy is not faltering, thanks in part to the solidity of employment and consumption.

US Strength

This is the case of the world’s largest economy, the United States, which will grow 2.7% this year, compared to the 2.1% anticipated three months ago.

“The very strong results of the United States are the result of growth in productivity and labor supply, but also of demand that remains strong and could drive up inflation. This should prompt the Federal Reserve to take a cautious, gradual approach to easing.” of its monetary policy, Gourinchas explained.

This trend is not reflected in the other advanced economies, particularly in the euro zone, where already weak growth has been revised slightly downwards to 0.8% (-0.1 percentage points, pp) due to the fragility of the two main economies in the region: Germany and France.

Spain It is one of the few exceptions, with a rise of 0.4 pp in the update of the Fund’s forecasts, up to 1.9%.

Among emerging economies, India and Brazil are the luckiest.

Domestic demand and the increase in the economically active population boost India among the fastest growing countries in the world: 6.8%.

Growth in Brazil (2.2%, +0.5 pp over the previous forecast) would be lower than in 2023, due to the effects of the monetary adjustment and ongoing budget consolidation, but improves on the January figure.

On the contrary, the Mexican economy fell 0.3 pp to 2.4%, among others due to a contraction in the manufacturing sector.

The IMF’s economic forecasts for the rest of the region this year vary considerably: Bolivia will grow 1.6%, Colombia 1.1%, Ecuador 0.1%, Paraguay 3.8%, Peru 2.5%, Uruguay 3.7% and Venezuela 4%. Central America will progress 3.9% and the Caribbean 9.7%.

For Argentina, the financial organization maintains its January forecast: GDP will contract 2.8% this year amid the fiscal adjustment carried out by the government of ultraliberal president Javier Milei, in an attempt to restore macroeconomic stability.

The forecast for Argentine inflation is just as dismal. The organization projects that it will touch 250% this year and drop to almost 60% in 2025.

Chinese weakness

The forecasts for China do not change either, with an expected growth of 4.6% this year, a sign that the slowdown in its economy continues.

“The Chinese government announced measures last month to stimulate the economy, but the weakness of the real estate sector remains persistent and our approach, taking into account these two factors, is to leave our forecasts unchanged”Gourinchas explained.

As in 2023, the Russian economy remains solid this year with a projected expansion of 3.02% (+0.6 pp over January) despite international sanctions. Russia keeps its machinery oiled due to public investment in military spending to finance the war in Ukraine.

The IMF’s optimism is short-term. For the future, global forecasts are not buoyant.

The prospects arebelow the historical annual average from 2000 to 2019 of 3.8%“, which reflects “restrictive monetary policies and withdrawals of fiscal support, as well as low underlying productivity“, reads the report known as WEO (World Economic Outlook), which the IMF releases at the beginning of its meetings this week in Washington.

And in the medium term, in production and trade, the forecasts continue to be the “lowest in decades.”