The International Monetary Fund (IMF) is poised to project consistent global growth along with ongoing disinflation in its upcoming World Economic Outlook, which will be released on January 17, according to statements made by IMF Managing Director Kristalina Georgieva.
She noted that the U.S. economy is performing better than anticipated, though uncertainty surrounding the trade policies under incoming President Donald Trump’s administration presents challenges for the global economy and contributes to rising long-term interest rates.
As inflation is nearing the Federal Reserve’s target, coupled with a stable job market, this allows the Fed to hold off on additional interest rate reductions while awaiting further data. Interest rates are anticipated to remain elevated for an extended period.
Meanwhile, Kristalina Georgieva’s remarks provide the initial glimpse into the IMF’s shifting global perspective for this year but did not offer specific projections.
Back in October, the IMF had revised up its 2024 growth forecasts upward for the U.S., Brazil, and the U.K., downgrading projections for China, Japan, and the eurozone due to potential risks from trade tensions, geopolitical conflicts, and strict monetary policies.
It maintained the 2024 global growth estimate at 3.2%, as projected in July, but reduced its 2025 global growth forecast by 0.1 percentage point. The organization cautioned that medium-term global growth could decline to 3.1% over the next five years, significantly below pre-pandemic levels.
Given the pivotal role of the U.S. economy, there is intense global interest in the policy directions of the incoming administration, particularly regarding tariffs, taxation, deregulation, and government efficacy. This uncertainty is notably pronounced concerning future trade policies, which adds to the challenges facing the global economy.
The IMF observed varied economic trends across regions, as in the European Union, growth is anticipated to plateau, while in India, it may slightly decline. Brazil is contending with rising inflation, while China’s deflationary pressures and persistent domestic demand challenges are evident. Meanwhile, lower-income countries, despite their reform endeavors, remain vulnerable to potential economic shocks.
Georgieva noted that despite increased interest rates to fight inflation, the global economy hasn’t slid into recession. However, diverse inflation trends mean that central bankers must closely watch local economic data.
In addition, the strong U.S. dollar could raise borrowing costs for emerging markets, particularly affecting low-income nations. She stressed the importance of cutting fiscal spending post-COVID and enacting growth-promoting reforms, as borrowing isn’t a sustainable solution.
