The world’s top financial leaders are in Washington, DC for the International Monetary Fund (IMF)/World Bank annual meetings, which kicked off with fresh projections for the global economy. The US economy is, once again, the standout among major rich economies.
The US economy has defied predictions of a recession and is on track to continue its world-beating streak of robust growth, according to new forecasts from the International Monetary Fund.
The world has faced several shocks in recent years — pandemic, inflation, war. But one thing has stayed constant: the US economy has come out in a better position than other large, developed nations.
The IMF’s World Economic Outlook projects that the United States will grow 2.8% this year, an upgrade of 0.2% from its July forecast. That is set to be the fastest growth among the G7 major economies, as was also the case in 2023. This time last year, the IMF anticipated a US slowdown to 1.5% growth in 2024, but it never happened.
The fund projects 2.2% US growth in 2025, a 0.3% upgrade from July, which would lag only Canada among G7 nations. The fund projects US consumer prices will rise 1.9% next year, implying that the pandemic price spike is over, and inflation next year will be back to the US Federal Reserve’s (Fed) target.
US outperformance is attributed to 2 major factors. First, there has been strong productivity growth, and second, a rise in immigration. There’s been an “increase in foreign-born workers in the US that have been integrated fairly quickly into the labour force… (which) remains one that is fairly robust, even though it has cooled off … from very, very tight levels.”
Source: Axios
The US upgrade was a key reason the IMF’s projection for global growth held steady at 3.1%. It made up for slower growth expectations in other advanced economies, which are dragging down global growth. Compared to July numbers, the fund downgraded its 2024 growth outlook notably for Japan (by 0.4) and Germany (by 0.2%).
Consumer spending and business investment in the US have been stronger than the IMF expected, forcing economists to push up growth forecasts for the rest of the year and 2025.
In a blog post, the IMF Chief Economist writes the “global battle against inflation has largely been won,” with worldwide inflation expected to fall to 3.5% by the end of next year — below the average in the two decades preceding the pandemic. That allows central banks to loosen their grip on major economies, “This would provide much-needed macroeconomic breathing room, at a time where risks and challenges remain elevated.”
