April 17: The International Monetary Fund (IMF) has raised its outlook for the global economy this year with a growth projected to reach 3.1 percent in 2024.

The latest World Economic Outlook (WEO) published by the IMF on Tuesday states that the 2024 forecast is 0.2 percentage point higher than the growth projected in October 2023 report.

The IMF said that the global economy is expected to grow on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.

The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth, the report states.

According to the IMF, inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down, added the report.

“With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced. On the upside, faster disinflation could lead to further easing of financial conditions.”

Lax fiscal policy than necessary assumed in the projections could imply temporarily higher growth, but at the risk of a more costly adjustment later on, added the report.

According to the IMF, stronger structural reform momentum could bolster productivity with positive cross-border spillovers.

On the downside, new commodity price spikes from geopolitical shocks––including continued attacks in the Red Sea––and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions. “Deepening property sector woes in China or, elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments.”

Meanwhile, the IMF report has pointed out the need to curb the rise of public debt and emphasized on a renewed focus on fiscal consolidation to rebuild budgetary capacity to deal with future shocks as well as to raise revenue for new spending priorities in the context that many economies are better equipped to absorb effects of fiscal tightening with the decline in inflation.

The report suggests that targeted and carefully sequenced structural reforms would reinforce productivity growth and debt sustainability and accelerate convergence toward higher income levels.

More efficient multilateral coordination is needed for, among other things, debt resolution, to avoid debt distress and create space for necessary investments, as well as to mitigate the effects of climate change, added the report.