IMF lifts global growth forecasts; Sees softer landing for major economies

The global economy is heading for a softer landing than first feared after the International Monetary Fund on Tuesday upgraded its growth forecast for the year.

Global growth for 2023 has been revised upwards to 3% from 2.8% three months ago. The 3% growth forecast for 2024 was left unchanged.

The upgrade follows a stronger than expected first quarter, but is still lower than 2022's 3.5%. Growth is forecast to remain weak until 2028 due to poor productivity.

Britain's growth outlook was held at 0.4% for this year, significantly lower than the 4.1% recorded in 2022. The IMF upgraded its outlook for the US economy by 0.2 percentage points this year to an annual rate of 1.8%.

Forecasts for China were unchanged at 4.2%, although the IMF warned that the world’s second-largest economy was “losing steam”. Successive data sets and business surveys have shown that Chinese growth is stalling after hopes that the surge in activity following the end of the country’s zero-Covid lockdown policy would boost global demand.

“Continued weakness in the real estate sector is weighing on investment, foreign demand remains weak and rising and elevated youth unemployment indicates labour market weakness,” the IMF said.

Germany was expected to contract by an expected 0.3% after a deep downturn in its manufacturing sector.

Overall, IMF director of research Pierre-Olivier Gourinchas said signs of progress were "undeniable".

“The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine," he added.

“Economic activity in the first quarter of the year proved resilient, despite the challenging environment, amid surprisingly strong labour markets. Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected.”

Reporting by Frank Prenesti for Sharecast.com