## Global Economy Remains Resilient Despite Uneven Growth, Challenges Ahead _IMF Blog, April 16, 2024_ ## Source details **Canonical URL:** [Global Economy Remains Resilient Despite Uneven Growth, Challenges Ahead](https://www.imf.org/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead) ## Other formats - [Markdown version](/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead/index.md) - [Structured JSON version](/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead/index.json) - [Bundle manifest](/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead/bundle-manifest.json) ## Bibliographic details - Authors: Pierre-Olivier Gourinchas - Published: April 16, 2024 --- ### Recent performance and outlook - 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. ### Inflation risks - 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: - Oil prices have been rising recently in part due to geopolitical tensions. - Services inflation remains stubbornly high. - Further trade restrictions on Chinese exports could push up goods inflation. ### Economic divergences across countries - United States: - Strong recent performance reflects robust productivity and employment growth and strong demand in an economy that remains overheated. - Calls for a cautious and gradual approach to easing by the Federal Reserve. - 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. - Euro area: - Growth will rebound but from very low levels as past shocks and tight monetary policy weigh on activity. - Continued high wage growth and persistent services inflation could delay return to target. - Little evidence of overheating; ECB must carefully calibrate pivot toward monetary easing to avoid an inflation undershoot. - Labor markets appear strong but could reflect labor hoarding if activity does not pick up. - China: - Economy remains affected by the downturn in its property sector. - Domestic demand likely to remain lackluster unless strong measures address the root cause; depressed domestic demand could raise external surpluses and exacerbate trade tensions. - Other large emerging market economies: - Many are performing strongly, sometimes benefiting from reconfigured global supply chains and rising trade tensions between China and the US. - Their footprint on the global economy is increasing. ### Policy priorities and recommendations - Rebuild fiscal buffers: - Real interest rates remain high and sovereign debt dynamics have become less favorable. - Credible fiscal consolidations can help lower funding costs, improve fiscal headroom and financial stability. - Fiscal plans to date are insufficient and could be derailed further given the record number of elections this year. - 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. - Reverse the decline in medium-term growth prospects: - Some decline stems from increased misallocation of capital and labor within sectors and countries; facilitating faster and more efficient resource allocation will boost growth. - 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. - Improve human capital of large young populations as the rest of the world ages rapidly. - 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. - Reverse rising geoeconomic fragmentation and the surge in trade restrictive and industrial policy measures to preserve trade linkages and global cooperation. - Preserve strengthened policy frameworks: - Safeguard the recent strengthening of monetary, fiscal and financial policy frameworks, especially in emerging market economies, including protecting central bank independence. - Accelerate the green transition: - Cutting emissions is compatible with growth; activity has become much less emission-intensive in recent decades, but emissions are still rising. - 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. - This will require technology transfer by advanced economies and China, and substantial private and public financing. - Emphasize multilateral frameworks and cooperation as essential for progress on these priorities. *This blog is based on Chapter 1 of the April 2024 World Economic Outlook; IMF Podcasts ยท Pierre-Olivier Gourinchas on the Global Outlook: Steady but Slow.* --- ## References - [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) _Source: https://www.imf.org/en/blogs/articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead_