The IMF has released its latest global economic outlook and it is far more positive than previously.
“Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia’s war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening.”
Forecasts for growth have been revised upwards, while expectations of inflation have been marked down.
Source: IMF
Global growth bottomed out at the end of 2022, at 2.3%, shortly after median headline inflation peaked at 9.4%. According to the IMF’s latest World Economic Outlook projections, growth this year and next will hold steady at 3.2%, with median headline inflation declining from 2.8% at the end of 2024 to 2.4% at the end of 2025. Most indicators continue to point to a soft landing.
The IMF also projects less “economic scarring” from the crises of the past four years, although estimates vary across countries. The US economy has already surged past its pre-pandemic trend. But they estimate that there will be more scarring for low-income developing countries, many of which are still struggling to turn the page from the pandemic and cost-of-living crises.
Source: IMF
As we have noted extensively in previous QBs, the strong recent performance of the United States has been exceptional, reflecting robust productivity and employment growth, but also strong demand.
China’s economy remains affected by the downturn in its property sector. Credit booms and busts never resolve themselves quickly, and this one is no exception. Domestic demand will remain lacklustre unless stronger measures are taken. With depressed domestic demand, external surpluses could well rise. The risk is that this will further exacerbate trade tensions in an already fraught geopolitical environment.
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