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IMF Reduces Growth Projections for China and Eurozone Amidst ‘Limping’ Global Economy

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Oct 16, 2023 #IMF
IMF

The International Monetary Fund (IMF) lowered its growth predictions for China and the Eurozone on Tuesday, October 10. It said that uneven and low global growth is still happening even though the US economy is “remarkably strong.”

Real GDP growth forecast for the world

The International Monetary Fund (IMF) has kept its 3.0% growth prediction for the global real GDP in its most recent World Economic Outlook (WEO). Still, it lowered its estimate for 2024 by 0.1 percentage points, to 2.9%, from what it said in July.

IMF: The world economy is starting to get better

Pierre-Olivier Gourinchas, the chief economist of the IMF, said that the world economy is still recovering from the effects of the COVID-19 pandemic, Russia’s invasion of Ukraine, and the energy crisis last year. He did say, though, that recovery trends around the world are becoming more different, and that growth chances for the next few years are “mediocre.”

China’s real estate crisis and inflation are causing worry

Some of the main things that worried Gourinchas were the real estate crisis in China, unstable commodity prices, the breakup of global politics, and the possibility that inflation would rise again.

Results of the Israel-Palestine Conflict

The recent worsening of the conflict between Israel and the Palestinians became a new risk. This happened at the same time that the World Bank and the International Monetary Fund met for their yearly meetings in Marrakech. Gourinchas said it’s too early to tell how the war will affect the world economy.

Things that stop stronger growth

Stronger growth has slowed down by things like the pandemic’s lasting effects, Russia’s war in Ukraine, growing fragmentation, rising interest rates, extreme weather events, and lessening government support. As a result, the IMF thinks that the world’s total output will be 3.4%, or about US$3.6 trillion, less than what was expected before the outbreak.

IMF: Long-Term Outlook for Growth

In the middle term, the IMF expects that the economy will grow by 3.1% in 2028. This is a lot less than the 4.9% growth it predicted before the global financial crisis in 2008–2009.

A Look at Inflation

The International Monetary Fund (IMF) predicts that world inflation will go down. It will average 6.9% in 2023, down from 8.7% in 2022. And then, it will drop even more, to 5.8% in 2024. It expected that core inflation, which doesn’t include food and energy prices, will go down more slowly.

Trends in investments and monetary policy

The IMF says that investment has gone down everywhere since before the pandemic. This is because interest rates have gone up, fiscal support has taken away, and loan conditions have become stricter. As Gourinchas said, countries should keep a close eye on monetary policy until inflation consistently falls towards goals.

IMF: Forecasts for Growth in the US and China

The IMF expected different outcomes for the USA and China. They said that China’s real estate crisis and weak external demand would lead to better outcomes for China but worse outcomes for the USA.

Predictions for Growth in the Eurozone, the UK, and Japan

It was also predicted that growth would slow down in the Eurozone. In the UK, growth expected to rise slightly in 2023 but fall in 2024. However, Japan is projected to grow for a number of reasons, which led to an upward revision of 0.6 percentage points for 2023.

 

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