Transcript of World Economic Outlook October 2024 Press Briefing
IMF News, October 22, 2024
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- Published: October 22, 2024
Global outlook: growth and inflation
- Headline inflation peaked at 9.4 percent year on year in the third quarter of 2022 and is projected to fall to 3.5 percent by the end of next year.
- Global growth is projected to hold steady at 3.2 percent in 2024 and 3.2 percent in 2025.
- Advanced economies: progress on disinflation is more pronounced; most advanced economies are expected to be back to their target sometime in 2025.
- Emerging markets and developing economies: greater dispersion of inflation outcomes; some countries (e.g., in the Middle East and sub‑Saharan Africa) still face double‑digit inflation.
- Services inflation remains elevated—described as “almost double prepandemic levels.”
- China: growth revised to 4.8 percent in 2024 (from July projections); 2025 forecast unchanged at 4.5 percent.
- United States: growth forecasts upgraded for 2024 and 2025; strong recent productivity growth and significant immigration have supported resilience.
- Sub‑Saharan Africa: growth steady at about 3.6 percent in 2024 and projected to increase to about 4.2 percent in 2025.
- Spain: projected growth 2.9 percent in 2024, after 2.7 percent in the prior year.
- Nigeria: 2024 growth revised down by .2 (driven by flooding impacts on agriculture and oil production disruptions).
Risks and adverse scenarios
- Overall risks are now tilted to the downside; a combination of shocks could reduce global output by about 1.6 percent in 2026.
- Geoeconomic fragmentation / trade escalation scenario:
- Estimated impact on world output: about 0.5 percent of output levels in 2026 from higher tariffs and increased trade policy uncertainty.
- Noted tripling of trade‑distorting measures implemented by countries since 2019 (from 1,000 to 3,000 measures).
- Middle East conflict escalation (illustrative from April analysis):
- Would act as an adverse supply shock, reducing output and increasing inflation.
- Historical exercise found an additional reduction in output of about 0.4 percent by 2026 and an increase in inflation of something on the order of 0.7 percent higher inflation in 2025.
- Other downside drivers: further escalation in regional conflicts, policy shifts toward protectionist trade and industrial policies, a sharp reduction in migration into advanced economies, and abrupt tightening of global financial conditions.
Policy triple pivot recommended
- Pivot 1 — Monetary policy:
- Easing is underway across major central banks as inflation declines; lower interest rates expected to support activity while labor markets cool.
- Caution urged because services inflation remains elevated and some emerging markets face rising price pressures requiring higher policy rates.
- IMF projection assumptions: two more rate cuts by the Fed in 2024 and four additional rate cuts in 2025, bringing the policy rate toward a terminal rate “around 2.75, 3.”
- Pivot 2 — Fiscal policy:
- Urgent need to stabilize debt dynamics and rebuild fiscal buffers.
- Current fiscal plans for the United States and China “do not stabilize debt dynamics.”
- Delaying consolidation raises the risk of disorderly adjustments; excessive abrupt tightening could harm activity.
- Recommendation: implement, without delay where necessary, a sustained and credible multi‑year fiscal adjustment that protects growth‑enhancing spending (health, public investment, climate transition) and targets support to the poor and vulnerable.
- Pivot 3 — Growth‑enhancing reforms:
- Avoid broad protectionist industrial and trade measures except to address well‑identified market failures or narrowly defined national security concerns.
- Prioritize domestic reforms to boost innovation, human capital, competition, and resource allocation.
- Recognize social resistance to reforms; use information strategies to improve support, build trust between governments and citizens, and include proper compensation measures.
Regional and country highlights
- Middle East and GCC:
- Conflict has inflicted a heavy toll at the epicenter (West Bank, Gaza, Lebanon); Israel affected but to a smaller extent so far.
- Commodity and oil price volatility observed; Saudi non‑oil output has performed well.
- Voluntary oil cuts were extended through November, weighing on oil growth in some GCC projections.
- Argentina:
- IMF projections for Argentina were not updated in October due to ongoing program discussions.
- Month‑on‑month inflation has declined to close to 3.5 percent, down from about 25 percent month on month in December of last year.
- Activity contracted substantially in the first half of the year but shows signs of gradual recovery (real wages and private credit improving).
- Euro area:
- Divergence across countries: manufacturing‑reliant economies (e.g., Germany) weaker; services/tourism‑oriented economies (e.g., Spain) stronger.
- Spain’s upward revision in 2024 driven by net exports, tourism receipts, private consumption, and investment—possibly reflecting use of EU recovery funds.
Policy conduct and practical points
- Central banks face a tougher “last mile” of disinflation in a world increasingly dominated by supply shocks (climate, health, geopolitical).
- Debt stabilization must balance consolidation with protection of growth‑friendly spending; country‑specific strategies required.
- International cooperation and trust‑building remain essential to address global challenges; 80th anniversary of the Bretton Woods Institutions noted as a context for cooperation.
Transcript of World Economic Outlook October 2024 Press Briefing, October 22, 2024 — IMF Communications Department