IMF economist explains global growth forecast for 2024, 2025

Summary

IMF Chief Economist Pierre Olivier Ginzburg discussed the IMF's optimistic global growth outlook, forecasting 3.1% growth this year and 3.2% in 2025, driven by resilient demand and easing inflation. Despite challenges in productivity, particularly in the Euro area, supply-side improvements such as stronger labor markets and falling commodity prices are supporting growth without triggering a recession. Ginzburg highlighted the risks of premature rate cuts by central banks, noting that while U.S. GDP growth is expected to outperform the Fed's forecast, interest rate cuts may not occur until late 2024, depending on inflation trends.

Takeaways

• 😀 The IMF has raised its global growth forecast, predicting 3.1% growth this year, in line with last year's performance.
• 😀 Global growth is expected to remain steady, with a slight uptick projected for 2025 at 3.2%.
• 😀 Inflation is decreasing faster than expected globally, including in the US, where inflation has already reached the Fed's 2% target.
• 😀 The IMF attributes the positive growth outlook to resilient consumption and fiscal support, particularly in the US.
• 😀 A strong labor market, increased labor force participation, and supply chain improvements have helped boost global growth.
• 😀 Commodity and energy prices are coming down, further supporting economic stability and contributing to lower inflation.
• 😀 Productivity growth in the US has improved recently, although productivity in regions like the Eurozone remains weak.
• 😀 Despite short-term growth resilience, the IMF is concerned about low productivity growth in the medium term, which could drag on long-term growth potential.
• 😀 Global central banks, including the Fed, are expected to hold off on rate cuts until the second half of the year to avoid undermining disinflation efforts.
• 😀 The IMF's forecast for US GDP growth is 2.1%, higher than the Fed's projection of 1.4%, signaling a more resilient economy domestically.

Q & A

What is the IMF's revised global growth outlook for 2024?

The IMF has raised its global growth forecast to 3.1% for 2024, which matches the growth rate of 2023. This is a 0.2% upward revision from their previous forecast.

What is the IMF's outlook for global growth in 2025?

The IMF expects global growth to slightly increase to 3.2% in 2025.

How is inflation expected to change in the near term, according to the IMF?

The IMF predicts that inflation will continue to decrease faster than expected, with both headline inflation and core inflation (excluding food and energy) falling more rapidly.

What factors are contributing to the improved global growth outlook?

The improved outlook is due to resilient consumption, fiscal support (such as government spending), and strong labor markets. Additionally, supply-side factors like the unwinding of supply chain disruptions and lower energy prices are playing a significant role.

What role has the U.S. economy played in the global growth revision?

The U.S. economy has contributed significantly to the revision, with strong consumer spending and fiscal policies supporting growth. This has led to better-than-expected economic performance.

Why is productivity a concern in the IMF's long-term growth forecast?

The IMF is concerned about low productivity growth in the medium term, particularly when looking three to five years ahead. Despite some short-term improvements in the U.S., productivity growth remains below historical averages.

How has the Eurozone's performance differed from the U.S. in terms of economic growth?

While the U.S. has experienced robust growth and productivity improvements, the Eurozone has struggled with weaker economic performance. Even though it has seen strong job creation, this has not been accompanied by significant output growth, limiting productivity gains.

What is the IMF's stance on potential surprises in growth for the U.S. economy?

The IMF acknowledges that if U.S. growth surprises on the upside, it could have different effects on inflation depending on whether the growth is demand-driven or supply-driven. Strong demand might increase inflationary pressures, while supply-side improvements could help control inflation.

What is the IMF's prediction for the U.S. GDP growth rate in 2024, and how does it compare to the Federal Reserve's forecast?

The IMF predicts U.S. GDP growth of 2.1% in 2024, which is higher than the Federal Reserve's forecast of 1.4%.

What are the risks associated with the Federal Reserve's potential rate cuts, according to the IMF?

The IMF highlights two main risks: if the Fed cuts rates too early, it could undermine the disinflation process by injecting too much stimulus into the economy. Conversely, if the Fed delays cuts for too long, it could harm growth unnecessarily.