Global Economy to Grow 3.1 Percent in 2024; Inflation Pressures Ease: Lmf

The global economy is expected to grow by 3.1 percent in 2024 and edge slightly higher to 3.2 percent in 2025, with projections indicating a moderate growth trajectory and a gradual easing of inflationary pressures over the next couple of years, according to the International Monetary Fund’s 2024 World Economic Outlook Report.

This forecast, while showing promise, falls below the historical average of 3.8 percent, influenced by several factors including elevated central bank policy rates aimed at curbing inflation, reduced fiscal support, and sluggish productivity growth, the IMF report said.

The report noted that Inflation, while a key concern for policymakers worldwide, is displaying signs of moderation across regions, outpacing earlier predictions.

Projections indicate a decline in global headline inflation from 6.8 percent in 2023 to 5.8 percent in 2024, further easing to 4.4 percent in 2025.

The unexpected drop in inflation levels reflects favourable supply-side developments and the effects of tight monetary policies implemented by central banks.

With the receding threat of a hard economic landing, risks to global growth appear to be balanced. Positive outcomes such as accelerated disinflation could lead to relaxed financial conditions, although an overly loose fiscal policy may present challenges in the long term.

Structural reforms aimed at enhancing productivity and debt sustainability could catalyze economic growth and foster international cooperation, especially in areas such as debt resolution and climate change mitigation.

The current economic landscape is characterized by resilient growth in major economies, including the United States and certain emerging markets, buoyed by robust government and private spending.

However, disparities persist, with subdued growth observed in regions like the euro area, marked by weakened consumer sentiment and energy price fluctuations.

Furthermore, the global economic recovery faces headwinds from high borrowing costs, particularly impacting commercial real estate and business investments.

While central banks have initiated rate hikes to combat inflation, the asynchronous nature of these decisions poses challenges, with varying impacts across different economies.

Fiscal policies, both in advanced and emerging markets, play a crucial role in shaping economic trajectories.

While advanced economies have eased fiscal policies, emerging markets face liquidity constraints and rising debt burdens, necessitating a shift towards tighter fiscal measures in the near term.

Looking ahead, policymakers face the dual challenge of managing inflation while promoting sustainable growth.

By calibrating monetary policies to evolving inflation dynamics and implementing targeted structural reforms, economies can strive towards a soft landing and pave the way for long-term prosperity.

Effective multilateral coordination remains imperative to address global challenges and foster inclusive growth across nations.