World Economic Outlook, October 2024: Policy Pivot, Rising Threats
World Economic Outlook, October 2024
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- Published: October 22, 2024
Overview
- The latest World Economic Outlook reports "stable but underwhelming global growth, with the balance of risks tilted to the downside."
- "As monetary policy is eased amid continued disinflation, shifting gears is needed to ensure that fiscal policy is on a sustainable path and to rebuild fiscal buffers."
- "Understanding the role of monetary policy in recent global disinflation, and the factors that influence the social acceptability of structural reforms, will be key to promoting stable and more rapid growth in the future."
Global growth and near-term outlook (Chapter 1)
- "Global growth is expected to remain stable yet underwhelming."
- Notable forecast revisions since April 2024:
- Upgrades to the forecast for the United States.
- Downgrades for other advanced economies, "in particular, the largest European countries."
- Downgrades in emerging market and developing economies: "the Middle East and Central Asia and ... sub-Saharan Africa" due to disruptions to production and shipping of commodities—especially oil—conflicts, civil unrest, and extreme weather events.
- Upgrades for emerging Asia driven by "surging demand for semiconductors and electronics, driven by significant investments in artificial intelligence," and supported by "substantial public investment in China and India."
- Five years from now, "global growth should reach 3.1 percent—a mediocre performance compared with the prepandemic average."
- Key near-term risks highlighted:
- Geopolitical tensions could flare up.
- Sudden eruptions in financial market volatility could tighten financial conditions.
- Problems in China’s property sector could generate global spillovers via their effect on global trade.
- Rising protectionism and continued geoeconomic fragmentation.
- Disruptions to the disinflation process that could prevent central banks from easing monetary policy, adding challenges to fiscal policy and financial stability.
- Policy message: "With monetary policy easing, shifting gears on fiscal policy to ensure sustainable debt dynamics and rebuilding of buffers is appropriate. Advancing structural reforms to boost long-term growth and accelerating the green transition remains as necessary as ever."
Inflation dynamics and monetary policy lessons (Chapter 2)
- Characterization of recent global inflationary episode:
- "Large sectoral demand shifts amid supply disruptions and unprecedented fiscal and monetary stimulus."
- Key findings:
- "The pass-through of sectoral price pressures to core inflation, and the shifting and steepening of the Phillips curve are essential to understanding the global inflation surge."
- "Key sectors hitting their supply bottlenecks as demand rotated across sectors and was boosted by a drawdown of savings."
- Monetary policy lessons:
- "In extreme cases with widespread sectoral supply bottlenecks and strong demand, inflation can surge, but tighter policy can bring it down quickly with limited output costs."
- "Outside of such cases, when supply bottlenecks are confined to specific sectors, conventional policy rules perform well."
- Implication: "As global disinflation continues, services price inflation remains elevated in many regions, pointing to the importance of understanding sectoral dynamics and of calibrating monetary policy accordingly."
Social acceptability of structural reforms (Chapter 3)
- Rationale: "Structural reforms are urgently needed as the world grapples with low growth, demographic shifts, and challenges related to the green and technological transitions."
- Problem: "Reform efforts have waned in recent years amid rising public resistance."
- Drivers of resistance identified:
- "Perceptions, misinformation, and trust deficits rather than economic self-interest."
- Strategies to increase support:
- "Information strategies that raise awareness of the need for reform and correct misperceptions about how policies work can boost support."
- "Effective strategies must be backed by strong institutional frameworks that foster trust and a two-way dialogue among stakeholders and the public."
- "Expanding policymaking toolkits to incorporate citizens’ views can lead to greater social acceptance and successful implementation of reforms."
- Emphasis: Social acceptability is framed as "a crucial prerequisite for successful implementation."
Key policy recommendations and priorities
- Near-term:
- Calibrate policies to ensure a "smooth landing" as cyclical imbalances wane.
- Maintain support for the most vulnerable while adjusting broader policy settings.
- Fiscal:
- "Shifting gears on fiscal policy to ensure sustainable debt dynamics and rebuilding of buffers is appropriate."
- Monetary:
- Calibrate monetary policy to sectoral inflation dynamics; recognize conditions where tighter policy can rapidly reduce inflation with limited output costs.
- Structural:
- Advance structural reforms to lift medium-term growth prospects and to support the green transition.
- Employ information strategies and institutional reforms to improve the social acceptability of reforms.
World Economic Outlook, October 2024: Policy Pivot, Rising Threats — International Monetary Fund
Content in this bundle
- Chapter 1 Data
- Chapter 3 Data
- Chapter 03
- Chapter 1
- 1.1 Network Exposures: Descriptive Evidence
- Chapter 2
- Chapter 2: The Great Tightening: Insights from the Recent Inflation Episode - Online Annex
- Chapter 3: Online Annexes
- Commodity Special Feature
- Executive Summary
- Foreword
- Statistical Appendix
- Table a
- Table b
- Full Report