Transcript of April 2024 World Economic Outlook Press Briefing
IMF News, April 16, 2024
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- Published: April 16, 2024
Global outlook and key statistics
- Global growth was 3.2 percent in 2023 and is expected to remain at that level both in 2024 and 2025.
- This represents a 0.3 percentage point upgrade from our October objections for 2024, driven by stronger activity in the U.S., China, and other large emerging markets, but weaker activity in the Euro Area.
- Median inflation will decline from 4 percent at the end of last year to 2.8 percent by the end of this year and 2.4 percent at the end of 2025.
- A resilient growth and rapid disinflation are attributed to favorable supply developments, including the fading of energy price shocks and a striking rebound in labor supply supported by strong immigration in many advanced economies.
- Estimates of economic scarring relative to pre‑pandemic (January 2020) trends have been reduced for most regions and countries but have increased for low‑income developing countries.
Inflation, monetary policy, and recent dynamics
- Inflation trends are encouraging but uneven: progress towards inflation targets has stalled since the beginning of the year in some countries.
- Risks to inflation: new price spikes from geopolitical tensions, persistent core inflation, services inflation remaining stubbornly high, and further trade restrictions pushing up goods inflation.
- Country divergences:
- United States: strong recent performance reflects robust productivity growth and growth in labor supply, but also strong demand pressures. IMF calls for a cautious and gradual approach to easing by the Federal Reserve and expects the U.S. to start easing sometime in 2024 (baseline), while noting month‑to‑month volatility in inflation prints.
- Euro Area: growth will rebound this year but from very low levels; little evidence of a hot economy and the European Central Bank will need to carefully calibrate the pivot towards monetary easing.
- China: domestic demand remains affected by the downturn in its property sector; monetary policy can only be more accommodative if root causes in the property sector are addressed.
- Scenario on energy shocks: a sustained increase in oil prices by about 15 percent would increase inflation globally by about 0.7 percent and lower output; the Middle East tensions have increased oil prices but a sustained spike is not in the baseline.
Regional and country‑level findings
- United States:
- IMF projects a 1.9 percent increase in the structural fiscal balance for 2024.
- Concerns that planned fiscal adjustments are often insufficient and may not be sustained, raising medium‑term fiscal and financial stability risks; higher term premiums could keep funding costs elevated despite monetary easing.
- Euro Area and Germany:
- Germany growth is modest at 0.2 percent (recent figure cited).
- Euro Area growth expected to rise from 0.4 percent in ‘23 to 0.8 percent in ‘24.
- China:
- Q1 GDP year‑on‑year reported at 5.3 percent (released overnight ahead of the briefing); IMF’s January forecast for the year remained 4.6 percent pending assessment of new data.
- Underlying weakness in the property sector persists; recommended measures include addressing struggling property developers (recapitalizing or winding down) and strengthening safety nets to sustain domestic consumption.
- Low‑income developing countries:
- More scarring is estimated compared with other regions due to high energy and food prices, increased food insecurity, and limited fiscal buffers.
- IMF stresses need for structural reforms to promote domestic and foreign investment and to improve human capital.
- Russia:
- IMF revised Russia’s GDP growth in 2024 upward by 0.6 percentage points to 3.2 percent; growth expected to decline to 1.8 percent in 2025.
- Drivers cited: steady oil export volumes, strong corporate investment (including state‑owned enterprises), robust private consumption, and increases in government security‑related spending; medium‑term growth remains well below pre‑war levels.
- Latin America and Caribbean (excluding Argentina and Venezuela):
- Growth projected to slow from 2.7 percent to 2.5 percent; IMF upgraded the 2024 forecast by 0.2 percentage points.
- Brazil: growth expected to fall from 2.9 percent in ‘23 to 2.2 percent in ‘24 and 2.1 percent in 2025; last year’s record agricultural production moderates.
- Mexico: growth expected to decline from 3.2 percent in ‘23 to 2.4 percent in ‘24 and to 1.4 percent in 2025.
- Argentina:
- Authorities implementing an ambitious stabilization plan centered on a strong fiscal anchor that eliminates central bank financing of the government.
- IMF notes a sharp decline in month‑on‑month inflation and that authorities have recorded a fiscal surplus for the first time in over a decade; progress requires steadfast policy implementation.
- Sub‑Saharan Africa:
- Growth for 2024 projected at 3.8 percent, up from 3.4 percent in 2023.
- Investor appetite is recovering for some countries (Côte d’Ivoire, Benin, Kenya Eurobond activity noted); risks remain around election‑year spending and potential short‑term disruptions.
- Nigeria:
- Growth revised from 2.9 percent to 3.3 percent for 2024.
- Growth drivers: recovery in the oil sector, improved security, better agriculture (including dry season farming), expansion in financial and IT sectors.
- Inflation projection revised up to 26 percent for this year, declining to 23 percent next year and 18 percent in 2026.
- India:
- IMF noted upgrades: referenced projected growth rates of 6.8 percent and 6.5 percent over the last 2 years and a 0.3 percentage point upgrade for Fiscal Year 2024 to 2025; tight monetary and fiscal policy helping disinflation (4.6 percent this year, 4.2 percent next year), with upside risks from stronger private demand and reforms to boost foreign investment and exports.
Risks, scenarios, and structural trends
- Risks broadly balanced:
- Downside: renewed energy price spikes from geopolitical tensions, persistent core inflation, disruptive fiscal adjustments.
- Upside: faster disinflation, timely structural reforms boosting productivity.
- Insufficient fiscal action could temporarily stimulate growth but force a costlier adjustment later.
- Geopolitical fragmentation and trade reconfiguration:
- Rising geo‑economic fragmentation is harming global growth prospects; reconfigured supply chains may benefit some economies but risk net efficiency losses and reduced global resilience.
- Technology and labor markets:
- Artificial intelligence could boost productivity but poses risks of serious disruptions in labor and financial markets; infrastructure and regulatory frameworks are needed.
- Climate and weather shocks:
- Increased weather shocks from climate change are impacting macroeconomic outcomes, with low‑income countries particularly vulnerable; extreme events (e.g., Pakistan floods referenced) have large economic costs.
Policy recommendations and IMF instruments
- Rebuild fiscal buffers:
- Priority to rebuild fiscal buffers in an environment of high real interest rates, modest growth, and elevated debts.
- Credible fiscal consolidation should start early, be gradual, and be credible to lower funding costs and improve fiscal headroom and financial stability.
- Protect policy frameworks:
- Preserve strengthened monetary, fiscal, and financial policy frameworks achieved in recent years, including protecting central bank independence.
- Support low‑income countries’ growth:
- Reverse medium‑term growth decline via structural reforms to promote investment, increase fiscal revenues, and improve human capital.
- Manage transition risks:
- Facilitate technology transfers and provide substantial private and public financing to support the green transition; multilateral cooperation is essential.
- IMF tools:
- The Resilience and Sustainability Trust and technical assistance are highlighted as instruments to help countries build resilience, adapt to climate change, and implement mitigation strategies.
Transcript of April 16, 2024 World Economic Outlook press briefing, IMF Communications Department.