IMF Sees Growth “Limping Along, Not Sprinting”

The IMF published its updated World Economic Outlook from Morocco on Tuesday. It painted a picture of soft but not collapsing growth but with inflation remaining “uncomfortably high”. IMF Director Research Gourinchas said “the global economy is limping along, not sprinting”. Global growth projections were unchanged from July for 2023 but down for 2024 but they hide significant variations.

• Risks to growth remain skewed to the downside but “some of the extreme risks have moderated since April”. China, oil prices, climate, geopolitics, and impact of further greenback strengthening on EM capital outflows remain concerns.
• Global growth was left at 3% this year down from 3.5% in 2022 but down 0.1pp to 2.9% next year. Gourinchas noted that the “slowdown is more pronounced” in advanced than developing countries with the latter expected to grow only 1.5% in 2023 and 1.4% in 2024 compared with 4% for both years in EM.
• Developed market growth was unrevised and while there were upward revisions to the US of around 0.4pp in both years to 2.1% and 1.5%, the euro area was revised down 0.2pp to 0.7% and 0.3pp to 1.2% due to sharp revisions in Germany, Italy and Spain. German growth is expected to contract 0.5% this year. The US was chastised for its procyclical fiscal policy.
• While developing country growth forecasts were also little changed, they were equally mixed with China and Africa seeing downward revisions, whereas Latin America and Russia were revised higher. The IMF noted that China is “facing growing headwinds” particularly from its property sector problems. GDP was revised down around a quarter point in both 2023 and 2024 to 5% and 4.2% respectively. The 0.2pp upward revision to India for 2023 helped reduce the impact on emerging Asia with forecasts down -0.1pp to 5.2% and -0.2pp to 4.8% respectively.

Source: MNI - Market News/IMF/World Bank/OECD