IMF upgrades global economy outlook, forecast growth and lower inflation

WASHINGTON (AP) — The International Monetary Fund has upgraded its outlook for the world economy this year, envisioning resilient growth led by the United States and a slower pace of inflation.

In its latest outlook, the 190-country lending agency said Tuesday that it now expects the global economy to grow 3.1% this year, unchanged from 2023 but better than the 2.9% it had predicted for 2024 in its previous estimate in October.

Worldwide, the IMF thinks inflation will ease from 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025.

In the most advanced economies, the agency expects inflation to drop this year to 2.6% and next year to the 2% level that the Federal Reserve and some other central banks have set as a target.

The combination of steady growth and falling inflation has raised hopes for a so-called soft landing for the global economy – a slowdown sufficient to contain inflation without causing a recession.

“We are now in the final descent toward a soft landing,'' Pierre-Olivier Gourinchas, the IMF's chief economist, told reporters ahead of the report's release.

The forecast for overall global growth this year and next (3.2%) trails the 3.8% average from 2000 to 2019.

That is partly because the Fed and other central banks aggressively raised interest rates to fight high inflation, and the resulting higher borrowing costs have slowed spending and investment.

Gourinchas said he expects “relatively limited'' economic damage from the attacks by Yemen-based Houthi rebels on shipping in the Red Sea.

The attacks have forced container ships carrying cargo between Asia and Europe to avoid the Suez Canal and instead take the long way around the tip of Africa, thereby delaying and disrupting shipments and raising freight charges.

But Gourinchas said that for now, the Red Sea disruptions don't seem to be “a major source of reigniting supply side inflation,” which arose from far more severe shipping backlogs in 2021 and 2022.

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