IMF global economy/ U.S. economic growth/ China economic slowdown/ global inflation/ Europe economic forecast/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The IMF has upgraded its U.S. economic growth forecast to 2.8% for 2024, citing strong consumer spending, while lowering expectations for Europe and China. Global growth remains unchanged at 3.2%, as inflation eases but geopolitical tensions and rising government deficits pose risks. The IMF projects slower growth for China and the eurozone, with inflation falling closer to central bank targets.
IMF Sees Stronger U.S. Growth, Tepid Global Outlook: Quick Looks
- The IMF upgraded its U.S. economic growth forecast to 2.8% for 2024, driven by strong consumer spending.
- Global growth remains unchanged at 3.2%, with weaker forecasts for China (4.8%) and the eurozone (0.8%).
- Inflation is cooling globally, allowing central banks to lower interest rates, but rising deficits may slow future growth.
- IMF warns that geopolitical tensions, such as U.S.-China relations, could disrupt global trade efficiency.
IMF Predicts Stronger U.S. Growth but Slower Outlook for Europe, China
Deep Look:
The International Monetary Fund (IMF) has provided a more optimistic economic outlook for the United States, revising its forecast for 2024 to 2.8% growth, an increase from the 2.6% projected in July. Strong consumer spending, buoyed by wage gains, is driving U.S. economic resilience, despite broader concerns about government deficits that could dampen growth in 2025.
The IMF’s updated global economic outlook, released on Tuesday, presents a mixed picture. While the U.S. is set to experience stronger growth this year, global growth remains tepid, with the forecast unchanged at 3.2% for 2024. The U.S. economy is projected to slow to 2.2% growth next year as the government begins tackling its large budget deficits.
U.S. Economic Strength Amid Global Challenges
The U.S. economy, the largest in the world, has been performing well compared to other advanced economies. Growth has been driven primarily by strong consumer demand, which has been supported by rising inflation-adjusted wages. While growth is expected to decelerate next year, it is still outperforming Europe and China, where economic activity has slowed.
In contrast, the IMF has downgraded its forecasts for both Europe and China. The 20 European nations that share the euro currency are now expected to grow just 0.8% in 2024, with Germany’s economy flatlining due to sluggish manufacturing and real estate sectors. The Chinese economy, still reeling from a property market collapse and weak consumer confidence, is projected to grow by 4.8% this year, down from 5.2% in 2023.
Cooling Inflation Provides Relief, But Deficits Loom Large
Globally, inflation is easing, which has allowed central banks, such as the U.S. Federal Reserve and the European Central Bank, to reduce interest rates after aggressive hikes aimed at curbing post-pandemic inflation. The IMF forecasts that global inflation will fall from 6.7% in 2023 to 5.8% in 2024, and down to 4.3% in 2025. In wealthier countries, inflation is falling faster, with projections showing it could hit central bank targets of around 2% by 2025.
“The battle against inflation is almost won,” said IMF chief economist Pierre-Olivier Gourinchas during a briefing. He added that inflation is now “hovering close to central bank targets” in most countries.
However, the IMF warns that while lower borrowing costs will boost economies, the need to rein in soaring government deficits could slow growth. The U.S. is expected to face pressure to curb spending or raise taxes, especially with a new presidential administration and Congress on the horizon. These fiscal challenges, combined with geopolitical tensions, present ongoing risks to the global economy.
Geopolitical Concerns and Trade Tensions
The IMF also expressed concern about rising geopolitical tensions, particularly the strained relationship between the United States and China. The organization warned that such tensions could lead to more countries conducting business solely with their political allies, which would reduce the overall efficiency of global trade.
Despite these concerns, the IMF predicts that global trade volume will grow by 3.1% in 2024 and 3.4% in 2025, an improvement over the meager 0.8% increase recorded in 2023. Yet, risks remain, as protectionism and shifting trade alliances could hinder long-term growth.
In addition to geopolitical factors, the IMF noted that reducing immigration in advanced economies, including the U.S., could stifle economic growth by exacerbating labor shortages. Armed conflicts, such as the ongoing wars in Ukraine and the Middle East, also pose threats to the global economic outlook.
Other Global Economic Trends
The IMF projects continued, albeit slower, growth for several key economies. India’s economy is expected to grow 7% this year before slowing slightly to 6.5% in 2025, as consumer spending cools after a post-pandemic boom. Meanwhile, Japan’s economy is forecasted to expand by a modest 0.3% this year, though growth is expected to accelerate to 1.1% in 2025 as the country recovers from production disruptions in its auto industry.
The United Kingdom is also showing signs of recovery. After managing only 0.3% growth in 2023, the U.K. economy is projected to expand by 1.1% this year, helped by falling interest rates that have spurred consumer spending.
