IMF forecasts 2024/25 global growth steady at 3.2%

The benchmark report of the International Monetary Fund (IMF) released earlier this year shows the fund making minor adjustments to its global growth figures, with the final number settling at 3.2% for 2024. This growth is largely being driven by developed economies like the United States and the Euro area. However, the outlook for low-income countries, especially in Africa, is not as positive. Daniel Leigh, the Head of World Economic Studies in the Research Department at the IMF, recently discussed these findings in an interview on CNBC Africa. Leigh started by highlighting the divergence in growth between developed economies and low-income countries. He emphasized that while the global forecast of 3.2% is steady, it is historically subpar compared to pre-Covid levels. The U.S. is expected to see growth of 2.7% this year, while the Euro area is also recovering, albeit at a lower level. On the other hand, large emerging markets like China and India are experiencing a decline in growth. Low-income countries are seeing an increase in growth rates, but per capita income growth remains below what is needed for them to catch up to middle-income status. Additionally, these countries have been significantly impacted by scarring from the Covid-19 pandemic and higher inflation, presenting a more challenging economic situation. Looking ahead, Leigh discussed the global inflation outlook. He mentioned that while central banks are aiming to combat inflation through higher interest rates, global inflation is expected to trend downward. The IMF projects a decrease in inflation from 6.8% last year to 5.9% this year, with most central banks nearing their inflation targets by 2025. However, the decline in inflation is happening at a faster pace in advanced economies compared to emerging markets and lower-income countries, where inflation expectations have been higher. When discussing the U.S. economy specifically, Leigh acknowledged the progress made in reducing inflation but highlighted that recent inflation figures have been above expectations. He noted that central banks need to focus on underlying measures rather than predetermined timelines when considering interest rate cuts to avoid potential backpedaling. Shifting the focus to sub-Saharan Africa, Leigh offered a more optimistic view, noting that the region is seeing improved investor confidence. Countries like Nigeria and South Africa are expected to experience growth, driven by factors such as better performance in the oil sector, enhanced security situations, and improvements in other key sectors. Despite these positive developments, high borrowing costs and inflation levels continue to present challenges. Leigh also addressed monetary policy in the region, mentioning that while interest rates are set to decrease, they remain restrictive due to persisting inflation concerns. He stressed the importance of continued vigilance in tackling inflation to create room for rate cuts and support economic growth. Looking at the broader inflation picture, Leigh highlighted that global inflation risks are now more balanced compared to previous months. In conclusion, Leigh touched upon the outlook for commodity prices, noting that while energy prices are expected to gradually decline, geopolitical shocks, particularly in the Middle East, pose significant risks to global inflation and economic growth. Overall, the IMF's report underscores the importance of closely monitoring inflation trends and geopolitical developments to ensure a stable economic trajectory in the coming years.