IMF Raises US Growth Forecast Lowers China Global Economy Slows Down
IMF boosts US growth forecast but cuts China highlighting global economic slowdown and risks from trade tensions conflicts and high interest rates
The International Monetary Fund (IMF) has updated its 2024 global economic outlook, boosting growth projections for the U.S., Brazil, and the UK, while lowering estimates for China, Japan, and the eurozone. Despite these shifts, the global economy is expected to maintain a sluggish pace, with plenty of risks ahead, including potential trade disputes, ongoing conflicts, and the long-term effects of high interest rates.
In its latest World Economic Outlook, the IMF kept its 2024 global growth forecast steady at 3.2%, the same as in July. However, the outlook for 2025 is slightly weaker, with growth projected at 3.2%, down a bit from previous estimates. Over the next five years, the IMF expects global growth to slow even further, down to 3.1%, far below the levels seen before the pandemic.
Positive Growth for the US, Brazil, and the UK
The U.S. economy continues to show strength, with the IMF raising its 2024 growth forecast to 2.8%, up by 0.2 percentage points. This improvement is largely driven by stronger consumer spending, fueled by rising wages and higher asset prices. The IMF also increased its 2025 growth forecast for the U.S. to 2.2%, slightly delaying the return to normal growth levels.
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Brazil’s economy received a major upgrade, with its growth forecast for 2024 rising by 0.9 percentage points to 3.0%. This is thanks to strong private consumption and increased investment. The UK’s growth outlook also improved, with a 0.4 percentage point increase to 1.1% in 2024, as falling inflation and lower interest rates are expected to boost consumer demand.
China, Japan, and Eurozone Face Downgrades
On the other hand, the IMF cut China’s 2024 growth forecast to 4.8%, a drop of 0.2 percentage points. This downgrade is due to ongoing weakness in the property market and low consumer confidence. However, China’s 2025 growth outlook remains unchanged at 4.5%, as the effects of recent stimulus plans from Beijing are still uncertain.
Japan’s growth forecast was also lowered, dropping by 0.4 percentage points to 0.3% in 2024, due to lingering supply chain disruptions. The eurozone didn’t fare much better, with its 2024 growth forecast slightly reduced to 0.8%. Germany, in particular, is struggling, with its manufacturing sector continuing to face challenges, resulting in no growth expected for this year.
India Remains a Bright Spot
India continues to shine with the strongest growth forecast among major economies. The IMF expects India’s economy to grow by 7.0% in 2024 and 6.5% in 2025, unchanged from earlier projections.
Trade and Other Risks
The IMF also highlighted risks related to trade tensions, pointing out that any major tariff hikes could lead to a negative impact on global growth. Although the report didn’t specifically mention U.S. presidential candidate Donald Trump’s proposals for higher tariffs, it outlined a scenario where increased tariffs between major economies like the U.S., China, and the eurozone could significantly hurt global GDP.
Other risks include rising oil and commodity prices, especially if conflicts in the Middle East or Ukraine worsen, which could lead to more economic uncertainty.
IMF Calls for Reforms
In his statement, IMF Chief Economist Pierre-Olivier Gourinchas urged countries to avoid protectionist policies aimed at shielding domestic industries, as these often fail to deliver lasting economic benefits. Instead, he emphasized the need for ambitious reforms that encourage innovation, boost competition, and attract private investment.
While inflation is cooling down globally, Gourinchas warned that central banks need to carefully manage monetary policy to ensure they don’t slow down economic activity too much as they tackle inflation.
As the global economy faces a mix of positive and negative trends, the IMF’s outlook underscores the need for cautious optimism, with continued attention to key risks and long-term challenges.
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