The International Monetary Fund (IMF) projects the global economy will grow by 3.2% in 2024 and 3.3% in 2025.
The latest Economic Outlook (WEO) report titled “global economy in a sticky spot” shows how inflation is holding up progress on disinflation, complicating monetary policy normalization.
According to the report, risks associated with inflation have increased, raising the prospect of higher for even longer interest rate.
Other factors exacerbating the current situation, include escalating trade tensions and increased policy uncertainty.
Pierre-Oliver Gourinchas, the IMF’s Economic Councillor, said in his blog, the world’s medium-term prospects remain weak.
He said “in our latest WEO update, we find that risks remain broadly balanced, but two downside near-term risks have become more prominent.
First, further challenges to disinflation in advanced economies could force central banks, including the Federal Reserve, to keep borrowing costs higher for even longer. That would put overall growth at risk, with increased upward pressure on the dollar and harmful spillovers to emerging and developing economies.”
He pointed to mounting empirical evidence, of global ‘headline’ inflation shocks, mostly in energy and food prices, that are driving the inflation surge and subsequent decline in many countries.
Graph: IMF