{
  "title": "Global Economy Remains Resilient Despite Uneven Growth, Challenges Ahead",
  "publication": "IMF Blog, April 16, 2024",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead",
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  "summary": "Policymakers should prioritize steps toward greater economic resilience such as strengthening government finances and revitalizing economic growth prospects.",
  "sections": [
    {
      "heading": "Recent performance and outlook",
      "content": "- Global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent.\n- World Economic Outlook projections: growth this year and next will hold steady at 3.2 percent.\n- Median headline inflation declining from 2.8 percent at the end of 2024 to 2.4 percent at the end of 2025.\n- Most indicators point to a soft landing.\n- Less economic scarring is projected overall, with the US economy having already surged past its prepandemic trend; more scarring is estimated for low-income developing countries.\n- Resilient growth and rapid disinflation reflect fading energy price shocks, a rebound in labor supply supported by strong immigration in many advanced economies, and monetary policy actions that helped anchor inflation expectations despite potentially muted transmission due to more prevalent fixed-rate mortgages."
    },
    {
      "heading": "Inflation risks",
      "content": "- Bringing inflation back to target remains the priority; progress toward inflation targets has somewhat stalled since the beginning of the year.\n- Key drivers of recent disinflation: decline in energy prices and in goods inflation driven by easing supply-chain frictions and a decline in Chinese export prices.\n- Ongoing risks:\n  - Oil prices have been rising recently in part due to geopolitical tensions.\n  - Services inflation remains stubbornly high.\n  - Further trade restrictions on Chinese exports could push up goods inflation."
    },
    {
      "heading": "Economic divergences across countries",
      "content": "- United States:\n  - Strong recent performance reflects robust productivity and employment growth and strong demand in an economy that remains overheated.\n  - Calls for a cautious and gradual approach to easing by the Federal Reserve.\n  - Fiscal stance is out of line with long-term fiscal sustainability and raises short-term risks to the disinflation process and longer-term fiscal and financial stability risks.\n- Euro area:\n  - Growth will rebound but from very low levels as past shocks and tight monetary policy weigh on activity.\n  - Continued high wage growth and persistent services inflation could delay return to target.\n  - Little evidence of overheating; ECB must carefully calibrate pivot toward monetary easing to avoid an inflation undershoot.\n  - Labor markets appear strong but could reflect labor hoarding if activity does not pick up.\n- China:\n  - Economy remains affected by the downturn in its property sector.\n  - Domestic demand likely to remain lackluster unless strong measures address the root cause; depressed domestic demand could raise external surpluses and exacerbate trade tensions.\n- Other large emerging market economies:\n  - Many are performing strongly, sometimes benefiting from reconfigured global supply chains and rising trade tensions between China and the US.\n  - Their footprint on the global economy is increasing."
    },
    {
      "heading": "Policy priorities and recommendations",
      "content": "- Rebuild fiscal buffers:\n  - Real interest rates remain high and sovereign debt dynamics have become less favorable.\n  - Credible fiscal consolidations can help lower funding costs, improve fiscal headroom and financial stability.\n  - Fiscal plans to date are insufficient and could be derailed further given the record number of elections this year.\n  - Recommendation: start credible, gradual multiyear consolidations now rather than waiting for market-imposed conditions; this will help pave the way for further monetary policy easing once inflation is under control.\n- Reverse the decline in medium-term growth prospects:\n  - Some decline stems from increased misallocation of capital and labor within sectors and countries; facilitating faster and more efficient resource allocation will boost growth.\n  - For low-income countries: implement structural reforms to promote domestic and foreign direct investment and strengthen domestic resource mobilization to lower borrowing costs and reduce funding needs.\n  - Improve human capital of large young populations as the rest of the world ages rapidly.\n  - Harness artificial intelligence potential by improving digital infrastructure, investing in human capital, and coordinating on global rules of the road, while remaining vigilant about disruptions in labor and financial markets.\n  - Reverse rising geoeconomic fragmentation and the surge in trade restrictive and industrial policy measures to preserve trade linkages and global cooperation.\n- Preserve strengthened policy frameworks:\n  - Safeguard the recent strengthening of monetary, fiscal and financial policy frameworks, especially in emerging market economies, including protecting central bank independence.\n- Accelerate the green transition:\n  - Cutting emissions is compatible with growth; activity has become much less emission-intensive in recent decades, but emissions are still rising.\n  - Green investment has expanded at a healthy pace in advanced economies and China, but other emerging market and developing economies must massively increase green investment growth and reduce fossil fuel investment.\n  - This will require technology transfer by advanced economies and China, and substantial private and public financing.\n- Emphasize multilateral frameworks and cooperation as essential for progress on these priorities.\n\nThis blog is based on Chapter 1 of the April 2024 World Economic Outlook; IMF Podcasts · Pierre-Olivier Gourinchas on the Global Outlook: Steady but Slow.\n\n---\n\n\n References\n\n- World Economic Outlook\n- global economy is increasing\n- debt dynamics have become less favorable\n- financial stability\n- misallocation of capital and labor\n- Harnessing the potential of AI\n- global financial system\n- independence of central banks\n- April 2024\n- listen to the podcast\n\nSource: https://www.imf.org/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead"
    }
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    "Authors: Pierre-Olivier Gourinchas",
    "Published: April 16, 2024",
    "Global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent.",
    "World Economic Outlook projections: growth this year and next will hold steady at 3.2 percent.",
    "Median headline inflation declining from 2.8 percent at the end of 2024 to 2.4 percent at the end of 2025.",
    "Most indicators point to a soft landing.",
    "Less economic scarring is projected overall, with the US economy having already surged past its prepandemic trend; more scarring is estimated for low-income developing countries.",
    "Resilient growth and rapid disinflation reflect fading energy price shocks, a rebound in labor supply supported by strong immigration in many advanced economies, and monetary policy actions that helped anchor inflation expectations despite potentially muted transmission due to more prevalent fixed-rate mortgages.",
    "Bringing inflation back to target remains the priority; progress toward inflation targets has somewhat stalled since the beginning of the year.",
    "Key drivers of recent disinflation: decline in energy prices and in goods inflation driven by easing supply-chain frictions and a decline in Chinese export prices.",
    "Ongoing risks:",
    "United States:",
    "Euro area:",
    "China:",
    "Other large emerging market economies:",
    "Rebuild fiscal buffers:",
    "Reverse the decline in medium-term growth prospects:",
    "Preserve strengthened policy frameworks:",
    "Accelerate the green transition:",
    "Emphasize multilateral frameworks and cooperation as essential for progress on these priorities.",
    "[World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024?cid=bl-com-SM2024-WEOEA2024001)",
    "[global economy is increasing](https://www.imf.org/en/Blogs/Articles/2024/04/09/emerging-markets-are-exercising-greater-global-sway)",
    "[debt dynamics have become less favorable](https://www.imf.org/en/Blogs/Articles/2024/04/10/industrial-policy-is-not-a-magic-cure-for-slow-growth)",
    "[financial stability](https://www.imf.org/en/Blogs/Articles/2024/03/28/the-fiscal-and-financial-risks-of-a-high-debt-slow-growth-world)",
    "[misallocation of capital and labor](https://www.imf.org/en/Blogs/Articles/2024/04/10/world-must-prioritize-productivity-reforms-to-revive-medium-term-growth)",
    "[Harnessing the potential of AI](https://www.imf.org/en/Blogs/Articles/2024/01/14/ai-will-transform-the-global-economy-lets-make-sure-it-benefits-humanity)",
    "[global financial system](https://www.imf.org/en/Publications/GFSR/Issues/2024/04/16/global-financial-stability-report-april-2024?cid=bl-com-SM2024-GFSREA2024001)",
    "[independence of central banks](https://www.imf.org/en/Blogs/Articles/2024/03/21/strengthen-central-bank-independence-to-protect-the-world-economy)",
    "[April 2024](https://www.imf.org/en/Publications/FM/Issues/2024/04/17/fiscal-monitor-april-2024?cid=bl-com-SM2024-FMOEA2024001)",
    "[listen to the podcast](https://www.imf.org/en/News/Podcasts/All-Podcasts/2024/05/02/gourinchas-weo-april-2024)"
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