IMF: Global growth remains steady at 3.2%

The International Monetary Fund (IMF) has released its latest World Economic Outlook Update, forecasting worldwide growth at 3.2 per cent for the current year. Pierre-Olivier Gourinchas, Chief Economist at the IMF, highlighted that global activity and world trade have shown resilience, driven mainly by robust exports from Asia. While global growth is expected to remain steady this year at 3.2 per cent, the IMF projects a slight increase to 3.3 per cent in the following year. However, despite the positive outlook, Gourinchas cautioned about several notable developments that could pose risks to the global economy. One key concern is the slowing growth in major advanced economies, with signs of cooling seen in the United States, while the euro area is experiencing an uptick in growth. Asia, particularly economies like India and China, continues to be a significant engine of global economic growth. The IMF revised upwards the growth projections for these countries, emphasizing that they account for almost half of global growth. Despite the current positive scenario, the IMF warned about the weak prospects for the next five years, especially projecting a moderation in China's growth rate to 3.3 per cent by 2029, significantly lower than its current pace. In terms of inflation, global inflation has slowed this year to 5.9 per cent, down from 6.7 per cent last year, indicating a soft landing. However, there are concerns in some advanced economies, particularly the United States, where progress on disinflation has slowed. Risks to the global economy remain broadly balanced, but there are emerging downside risks that need attention. These risks include the potential challenges on the disinflation path in advanced economies, which could lead to higher borrowing costs for an extended period. Additionally, fiscal challenges need to be addressed more directly, as many countries are facing deteriorating public finances, leaving them vulnerable. The IMF stressed the importance of gradually rebuilding buffers to address emerging spending needs and provide policy space to tackle unexpected shocks. The gradual dismantling of the multilateral trading system was highlighted as another key concern, with more countries resorting to unilateral measures that could distort trade and weaken global growth. Gourinchas emphasized the significance of constructive multilateral cooperation to ensure a safe and prosperous global economy for all. To sustainably improve medium-term growth prospects, the IMF chief economist called for more efficient allocation of resources, better education opportunities, greener innovation, and stronger policy frameworks. It is essential to focus on equality of chances and coordination of policies to address global challenges effectively.