The International Monetary Fund’s latest forecast suggests the global economy is facing sluggish growth this year. /CFP
The International Monetary Fund’s latest forecast suggests the global economy is facing sluggish growth this year. /CFP
The global economy is moving forward, but experts warn it won’t set any sprinting records, even if it is an Olympic year.
The International Monetary Fund (IMF) released its latest report on Tuesday, saying economic output will climb 3.2 percent. Global gross domestic product (GDP) grew by the same amount last year and the forecast for 2025 is exactly the same.
The figure is significantly below the average for the past two decades – annual GDP growth between 2000 and 2019 was just under 4 percent.
The IMF has warned that high interest rates could hurt global growth in 2024. /Yuri Gripas/Reuters
The IMF has warned that high interest rates could hurt global growth in 2024. /Yuri Gripas/Reuters
The inflation situation
The IMF is pointing to restrictive monetary policy, saying many countries are still using high interest rates to fight inflation. High rates make it more expensive to borrow money. That can have a knock-on effect, reducing spending and ultimately, putting the brakes on inflation.
Consumer price inflation reached an average of 8.7 percent in 2022, when many countries were rocked by a cost-of-living crisis. It dipped just below 7 percent in 2023, and looks set to fall to 5.9 percent this year.
But it seems the battle isn’t over, with central banks in the United States and Europe still holding off on rate cuts. The IMF says growth could suffer as countries try to manage the threat of rising prices. It’s also warning that inflation isn’t the only problem – many countries are also struggling to improve productivity levels.
The Euro area economy is set to expand by less than 1% this year. /CFP
The Euro area economy is set to expand by less than 1% this year. /CFP
India, China pushing ahead
There are some glimmers of hope. The latest projections suggest India will register growth of 6.8 percent in 2024. The IMF is also predicting growth for China, saying its economy will expand 4.6 percent.
The U.S. economy looks set for relatively robust growth with a forecast of 2.7 percent. But Europe is taking strain – together, the economies of the Euro area are set to grow less than 1 percent before bouncing back with 1.5 percent growth next year.
Trade volumes are set to climb in 2024, but the IMF is warning about a surge in restrictions. /Phil Noble/Reuters
Trade volumes are set to climb in 2024, but the IMF is warning about a surge in restrictions. /Phil Noble/Reuters
Stumbling blocks for global trade
Global trade volumes are on the up, even though attacks on ships in the Red Sea caused some supply chain headaches. The IMF expects trade figures to climb 3 percent in 2024 and 3.3 percent next year.
But there are threats on the horizon. The number of cross-border trade restrictions surged to 3,000 last year – nearly triple the amount in 2019. Many countries are choosing to do business with their neighbours or allies, a trend known as “friend-shoring.” The IMF says there are “increasing fractures along geopolitical lines, especially since the start of the war in Ukraine in February 2022.”
The report makes it clear that the global economy is heading in the right direction, despite those stumbling blocks. The world’s GDP shrunk more than 3 percent in 2020, when the COVID-19 pandemic wiped out trillions of dollars in economic output. In that context, any growth is good growth. But the pace is the problem – and right now, it is decidedly slow.
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