The violent development of the conflict in the Middle East over the past year poses a serious risk, particularly for commodity markets, according to the IMF's economists.
They also warn of the effects of protectionism and worsened trade conflicts – which can disrupt supply chains – as well as overly tight monetary policy as they paint their scenario in a new edition of the World Economic Outlook.
"Opening up for monetary policy easing"
The global inflation problem appears to be resolved, according to the IMF economists, who expect global growth of 3.2 percent this year and next. This is in line with the latest updated forecast in July for 2024, but 0.1 percentage points lower for 2025.
"In most countries, inflation is now close to the central banks' targets, which opens up for monetary policy easing among the major central banks," writes the IMF's chief economist Pierre-Olivier Gourinchas in a blog post accompanying the presentation of the forecast.
"Monetary policy can remain too tight for too long, and global financial conditions can deteriorate abruptly," he adds.
"Increasingly intense conflicts"
According to Gourinchas, the world economy has so far shown unexpected resilience in the face of monetary policy tightening, which has contributed to reducing inflationary pressures.
"However, some low-income and developing countries have received significant downward revisions of growth, often linked to increasingly intense conflicts," he adds about the forecast.
China's real estate sector is also highlighted as a risk factor in the report, which is presented ahead of the IMF's autumn meeting in Washington. The IMF warns that this could hit demand in China, which could have spillover effects globally.
The International Monetary Fund (IMF) confirms its global growth forecast for this year at 3.2 percent, but revises down its expectations for 2025 by 0.1 percentage points to 3.2 percent for that year as well.
When it comes to the major economies, the forecast is revised upwards for the US, but downwards for the eurozone, China, and Japan.
The US growth forecast is raised by 0.2 percentage points to 2.8 percent this year and by 0.3 percentage points to 2.2 percent in 2025.
The eurozone's growth forecast is lowered by 0.1 percentage point to 0.8 percent this year and by 0.3 percentage points to 1.2 percent in 2025. The forecast for the German economy is lowered by 0.2 percentage points to 0 percent growth this year and by 0.5 percentage points to 0.8 percent in 2025.
The forecast for China is lowered by 0.2 percentage points to 4.8 percent this year, but remains at 4.5 percent in 2025.
Japan's growth forecast is lowered by 0.4 percentage points to 0.3 percent this year, but is revised up by 0.1 percentage point to 1.1 percent next year.
World trade is expected to increase by 3.1 percent this year and 3.4 percent in 2025, while global price increases (inflation) are estimated at 5.8 percent this year and 4.3 percent in 2025.
Source: IMF, World Economic Outlook – Policy Pivot, Rising Threats (October 2024)
