New IMF economic forecast for 2024: USA-China-India, Europe in catastrophe


Thea Fathanah ArbarCNBC Indonesia


Tuesday, January 30, 2024 9:35 p.m. IWST

Photo: IMF logo. (REUTERS/Yuri Gripas/File Photo)

Jakarta, CNBC Indonesia – The International Monetary Fund (IMF) has provided the latest economic news for 2024. The institution has raised its forecast for global growth this year.

In the current World Economic Outlook (WEO), growth this year is expected to be around 3.1%, 0.2 percentage points more than forecast in October. The reason for this is the unexpected “resilience” in developed and developing countries.

“At the same time, we have reduced inflation and increased growth,” IMF chief economist Pierre-Olivier Gourinchas told reporters ahead of the report’s release AFP, Tuesday (January 30, 2024).

“This is not just a US story. Many countries have shown great resilience over the last year and into 2024,” he said, highlighting other countries such as China, Russia, Brazil and India.

Despite the improvement, global growth is expected to remain below the historical average of 3.8% this year and next. The This is due to the ongoing impact of rising interest rates, the withdrawal of government support related to the pandemic and still low productivity.

Among developed countries in the Group of Seven (G7), growth in European countries is expected to remain weak. However, somewhat better development is expected for Japan and Canada.

The IMF's overall inflation outlook remains unchanged at 5.8% for 2024. However, this masks significant underlying shifts between rich and poor countries.

Inflation in developed countries is estimated at 2.6%. in 2024, 0.4 percentage points less than in October. Meanwhile, emerging and developing economies are expected to reach an annual inflation rate of 8.1%, an increase of 0.3 percentage points.

Much of this increase was due to ongoing problems in Argentina. It is worth noting that the country recorded over 200% increase in consumer prices last year amid the ongoing economic crisis.

USA and China

In particular, the US and China – the world's two largest economies – have significantly improved their growth prospects in 2024. This puts them on track for a less severe slowdown than previously estimated by the IMF.

The IMF now estimates that the US economy will grow by 2.1%. This is a slight decrease from the estimated 2.5% in 2023. Please note that this year is an election year in the country where President Joe Biden will run for a second term.

“This is largely due to the residual statistical effects of stronger-than-expected growth outcomes in 2023,” the IMF said.

Meanwhile, China's economy is expected to grow 4.6% this year. That's down from 5.2% last year.

However, the growth figures were better than expected. The problems in the real estate sector are expected to have a less severe impact than previously estimated by the IMF.

“This is also due to the significant fiscal support provided by the authorities,” Gourinchas said again.

India bright spot

The bright spot in the global economy is India. According to the IMF, the country will grow by 6.5% this year.

The value rose by 0.2 percentage points compared to October, after a growth rate of 6.7 percent was forecast for 2023. The IMF also raised growth prospects for Russia, Iran and Brazil next year.

Desperate Europe

Europe itself continues to have a negative impact on the global outlook, according to IMF forecasts. It was said that growth was particularly weak in the euro area.

Germany will once again be the slowest growing G7 country with growth of just 0.5% this year. This comes after a decline of around 0.3 percent was recorded in 2023.

Great Britain, France and Italy are also expected to grow by 1.0% or less this year. Meanwhile, the Spanish economy is expected to grow slightly better, namely by 1.5%.

“Weak growth in the euro area reflects weak consumer sentiment, the ongoing impact of high energy prices and weak interest-sensitive industrial and business investment,” the IMF said in the WEO report.

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