IMF Predicts Slightly Slower Global Growth in 2024, 2025

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Washington: Global growth is expected to ease slightly to 3.2 percent this year and remain at that level in 2025, according to the International Monetary Fund (IMF), which released its latest World Economic Outlook (WEO) report on Tuesday. However, the IMF cautioned that these stable figures mask “important” regional and sectoral shifts.

The report also forecasts that global inflation will continue to ease, dropping to 5.8 percent this year before falling further to 4.3 percent in 2025.

A stark divide is anticipated between advanced economies, where inflation is expected to decrease to 2 percent next year, and emerging market and developing economies, where inflation is predicted to ease to 5.9 percent by 2025.

“The battle against inflation is almost won,” IMF chief economist Pierre-Olivier Gourinchas said during a press briefing. He highlighted that reducing inflation without triggering a global recession is a significant accomplishment.

The WEO report noted that global growth is projected to trend downwards to a modest 3.1 percent by 2029, warning of rising risks to this figure. “The picture is far from monolithic,” the report stated, highlighting important sectoral and regional shifts over the last six months.

The publication of the WEO comes as the IMF and World Bank Annual Meetings kicked off in Washington, where finance ministers and central bankers from around the world have gathered to discuss the health of the global economy.

Strong Growth in the US

The report underscores that the United States remains a key driver of global growth, contrasting sharply with the eurozone, where growth remains sluggish.

The U.S. economy is expected to grow by 2.8 percent this year, slightly down from the 2.9 percent growth seen in 2023, but still slightly above the IMF’s July forecast.

Growth is anticipated to slow to 2.2 percent by 2025 as fiscal policy tightens and a cooling labor market curbs consumption.

“The US economy has been doing very well,” Gourinchas said in an interview with AFP ahead of the report’s release, attributing the positive performance to strong productivity growth and a surge in immigration.

Europe Faces Slower Growth

In contrast, Europe continues to see weak economic performance, with growth expected to rise only marginally from 0.8 percent this year to 1.2 percent in 2025.

While France and Spain have seen improvements in their growth outlook for 2024, the IMF downgraded its projections for Germany, reducing its forecast by 0.2 percentage points for 2023 and by 0.5 percentage points for 2024, due to “persistent weakness in manufacturing.”

The United Kingdom is expected to experience faster growth in 2024 and 2025 as declining inflation and lower interest rates boost domestic demand.

China and India Experience Slower Growth

Growth in Japan is forecasted to slow to just 0.3 percent this year, with a rebound to 1.1 percent in 2024 as private consumption strengthens, driven by rising real wages.

In China, the world’s second-largest economy, growth is expected to decelerate from 5.2 percent last year to 4.8 percent this year, before easing further to 4.5 percent in 2025. The IMF pointed to weaknesses in China’s real estate sector and low consumer confidence but noted that “better-than-expected” net exports have prevented a more significant slowdown.

India’s growth is projected to slow more sharply, falling from 8.2 percent in 2023 to 7.0 percent this year, with further deceleration to 6.5 percent expected in 2025 as the “pent-up demand accumulated during the pandemic” fades.

Regional Outlooks

In the Middle East and Central Asia, the IMF forecasts growth to pick up slightly to 2.4 percent this year, with a more significant rise to 3.9 percent in 2025, as disruptions in oil and shipping fade.

In Sub-Saharan Africa, the IMF expects growth to remain steady at 3.6 percent this year, increasing to 4.2 percent in 2025 as weather-related shocks subside and supply constraints ease.