IMF lifts GDP forecasts as inflation slows faster than expected

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Sharecast News | 30 Jan, 2024

Updated : 15:42

The International Monetary Fund says that a global soft landing is a possibility as its raised its projections for economic growth in 2024 and 2025.

The IMF's January update to its World Economic Outlook report puts world GDP growing at 3.1% in 2024, in line with the growth seen in 2023 but up 0.2 percentage points (pp) from the IMF's previous forecast in October. 2025 growth is still pencilled in at 3.2%.

The UN financial agency said the upgrade was due to "greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China".

US GDP growth is expected to ease from 2.5% in 2023 to 2.1% in 2024 and 1.7% in 2025, as a result of lagged effects of restrictive monetary policy and a softening in labour markets, but the 2024 forecast is still a 0.6pp upwards revision from October.

Inflation is falling faster than expected in most regions, the IMF said, and is now tipped to fall from 6.8% in 2023 to 5.8% this year and 4.4% next year, with the 2025 forecast being revised down by 0.2pp.

"With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced," the IMF said.

Upside risks include faster disinflation leading to the further easing of financial conditions, stronger productivity with "positive cross-border spillovers". Meanwhile, downside risks include new commodity price spikes from geopolitical shocks – like continued attacks in the Red Sea – supply disruptions or more persistent underlying inflation. The IMF also pointed to the risk of a further downturn in China's property sector.

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