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Please fasten your seatbelts and put away all electronic devices. Here comes the soft landing everyone’s predicting, at least according to the International Monetary Fund’s (IMF) most recent global economic forecast.
The new forecast predicts global growth “will steady at 3.1% this year,” revising the IMF’s October forecast upward by 0.2 percentage points. The IMF expects a growth rate of 3.2% in 2025.
“The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up,” Pierre-Olivier Gourinchas, economic counselor and research director at the IMF, wrote in the forecast. “But the pace of expansion remains slow, and turbulence may lie ahead.”
What’s good? Things are looking up across several economic indicators. For one, the IMF revised its 2024 inflation forecast (excluding Argentina) to 4.9%, down 0.4 percentage points from October.
What’s more, “disinflation could happen faster than anticipated,” Gourinchas wrote. Fiscal tightening may also take a back seat to “increased public spending” during what the IMF called “the biggest global election year in history.” Artificial intelligence technology could prove a boon to productivity, but may pose new challenges for workers.
Potential spoiler. But about that turbulence: War and other “geopolitical tensions, especially in the Middle East,” could create new “supply disruptions.”
Other challenges IMF identified include the chance that core inflation could remain stubborn, as “the price of goods remains historically elevated relative to that of services.” Also, “markets appear excessively optimistic” about potential early interest rate cuts, Gourinchas wrote. Should investors re-assess their view, long-term interest rates would increase.
Results may vary. Gourinchas said economic growth will vary by location, meaning US residents and businesses may not feel as much relief as others to the south or across the pond.
Specifically, the IMF projected growth will remain slow in the US and China, while activity in the “euro area” should pick up slightly in 2024. Growth will accelerate in some economies, including Brazil, India, and Southeast Asia.
What the US is saying. Speaking in Chicago last week, Treasury Secretary Janet Yellen noted the economy recovered much faster post-pandemic than after other downturns in recent memory—most notably the Great Recession, when it took 12-plus years for the working population to return to pre-recession levels.
“The recovery we’ve had—instead of one that was weaker or less fair—meant that we avoided financial pain for most middle-class American families,” Yellen said.