Washington, Oct 23
The International Monetary Fund (IMF) has maintained its global growth forecast in 2024 at 3.2 per cent, consistent with its projection in July, according to its newly released World Economic Outlook (WEO).
The level of uncertainty surrounding the global economic outlook is high, the report noted on Tuesday.
"Newly elected governments (about half of the world population has gone or will go to the polls in 2024) could introduce significant shifts in trade and fiscal policy," Xinhua news agency quoted the report as saying.
"Moreover, the return of financial market volatility over the summer has stirred old fears about hidden vulnerabilities. This has heightened anxiety over the appropriate monetary policy stance -- especially in countries where inflation is persistent and signs of slowdown are emerging," it further said.
The report also noted that a further intensification of geopolitical rifts could weigh on trade, investment and the free flow of ideas. "This could affect long-term growth, threaten the resilience of supply chains, and create difficult trade-offs for central banks," it said.
In response to a question, IMF Chief Economist Pierre-Olivier Gourinchas said at a press conference that rising geopolitical tensions are "something that we are very concerned about", noting that there are two dimensions of the impact.
"One is, of course, if you increase tariffs, for instance, between different blocks, that will disrupt trade, that will misallocate resources, that will weigh down on economic activity," said Gourinchas.
"But there is also an associated layer that comes from the uncertainty that increases related to future trade policy, and it will also depress investment, depress economic activity and consumption," he continued.
The chief economist noted that the IMF has found an impact on global output levels of approximately 0.5 per cent in 2026. "So it's a quite sizable effect of both an increase in tariffs between different countries and an increase in trade policy uncertainty," he said.
According to the latest WEO report, global growth is projected to hold steady, but there are weakening prospects and rising threats.
The growth outlook is very stable in emerging markets and developing economies, around 4.2 per cent this year and next, with continued robust performance from emerging Asia, the report said.
Noting that the return of inflation near central bank targets paves the way for a policy triple pivot, Gourinchas said that the first pivot -- on monetary policy -- is underway already.
The second pivot is on fiscal policy, he noted. "After years of loose fiscal policy in many countries, it is now time to stabilize debt dynamics and rebuild much-needed fiscal buffers," Gourinchas said.
The third pivot -- and the hardest -- is toward growth-enhancing reforms, he said. "Much more needs to be done to improve growth prospects and lift productivity," he said.
The IMF chief economist noted that while industrial and trade policy measures can sometimes boost investment and activity in the short run, especially when relying on debt-financed subsidies, "they often lead to retaliation and fail to deliver sustained improvements in standards of living."
"Economic growth must come instead from ambitious domestic reforms that boost technology and innovation, improve competition and resource allocation, further economic integration and stimulate productive private investment," he added.