The April 2024 WEO Update

• The International Monetary Fund (IMF) has projected that the global economy will continue its trajectory of slow yet steady growth for another year. Despite facing headwinds such as lingering high inflation, subdued demand in China and Europe, and spillover effects from regional conflicts, the strength of the US economy is expected to buoy worldwide output. The IMF’s forecast indicates a global real GDP growth rate of 3.2% for both 2024 and 2025, mirroring the pace observed in 2023. Notably, the forecast for 2024 has been slightly upgraded by 0.1 percentage point compared to the previous estimate in January, primarily attributed to a significant upward revision in the outlook for the US.

• The outlook for global growth five years from now stands at 3.1%, marking its lowest level in decades. Projections indicate a gradual decline in global inflation, with a decrease from 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025. Advanced economies are anticipated to achieve their inflation targets sooner compared to emerging market and developing economies.

• The global economy persists in showcasing remarkable resilience, maintaining steady growth while witnessing a decline in inflation. However, numerous challenges remain on the horizon. The IMF has cautioned that a potential escalation of the conflict in the Middle East, particularly following Iran’s rocket and drone attack on Israel, could exert a significant dampening effect on growth. Such an escalation is anticipated to elevate oil prices and inflation, prompting central banks to adopt tighter monetary policies. The report also outlines an ‘adverse scenario’ wherein a Middle East escalation results in a 15% surge in oil prices, accompanied by increased shipping costs that could elevate global inflation by approximately 0.7 percentage points.

• Notably, the IMF forecast that global median headline inflation will fall to 2.8% by the end of 2024 from 4% last year, and to 2.4% in 2025.

• Specifically, advanced economies are anticipated to experience a slight acceleration in growth, with projected rates rising from 1.6% in 2023 to 1.7% in 2024 and further to 1.8% in 2025. However, this uptick will be counterbalanced by a modest deceleration in emerging markets and developing economies, where growth is forecasted to decline from 4.3% in 2023 to 4.2% in both 2024 and 2025.

Source: TA Research - 3 May 2024