The IMF revises global growth upwards due to the strength of the US, but worsens its forecast for the eurozone

All the major euro economies see their growth forecasts cut, except Spain

MADRID, 16 Abr. (EUROPA PRESS) -

Global economic growth will be slightly stronger than previously expected, according to the International Monetary Fund (IMF), which has raised its previous forecast for 2024 by one tenth, to 3.2%, while leaving unchanged at 3.2%. .1% in 2025, as a result of greater momentum from the United States, in contrast to the weaker recovery now expected for the eurozone, where only Spain sees its growth expectations improved among the large economies of the bloc.

The institution points out that global economic activity has been "surprisingly resilient" during the period of disinflation experienced in the last two years, although it recognizes that the estimated growth rate "is historically slow", due to short-term factors, such as costs still high debt levels and the withdrawal of fiscal supports, as well as the longer-term effects of the pandemic and the Russian invasion of Ukraine, weak productivity growth and increasing geoeconomic fragmentation.

In its 'World Economic Outlook' report, presented this Tuesday in Washington, the IMF affirms that the risks to the global outlook are now "quite balanced", although it warns of the threat of a new price escalation derived from geopolitical tensions, such as the war in Ukraine and the situation in the Middle East.

Likewise, it considers that high interest rates "could slow down the economy more than expected", since the expiration and renegotiation of fixed-rate mortgages and high household debt could cause financial tensions, while in China, the The lack of a comprehensive response to the problems of the real estate sector could hinder growth and harm its commercial partners.

Given this scenario, "with the soft landing of the world economy already in sight", for the Fund the short-term priority of central banks is to guarantee the smooth decline of inflation, without making policies prematurely or doing so too much. late, while, as the monetary authorities adopt a less restrictive stance, "emphasis will have to be placed on fiscal consolidation in the medium term" to recover room for budgetary maneuver, carry out priority investments and guarantee debt sustainability.

"Despite many gloomy predictions, the world has avoided a recession, the banking system has for the most part demonstrated resilience, and the major emerging market economies have not suffered sudden stops in capital inflows," noted Pierre-Olivier. Gourinchas, chief economist of the IMF, recalling that the escalation of inflation, despite its severity, "did not trigger uncontrolled spirals of prices and wages" and has been reduced almost as quickly as it increased.

The IMF's new macroeconomic forecasts contemplate, in the case of advanced economies, an increase in growth of 1.7% in 2024 and 1.8% in 2025, which represents an upward revision of two tenths for this year of the forecast of January, while it remains the same for 2025.

This improvement in 2024 reflects a revision of US growth that offsets the downward revision of projections for the euro area, notes the IMF.

For the United States, growth is forecast to rise to 2.7% in 2024, before slowing to 1.9% in 2025, as gradual fiscal tightening and weakening labor markets slow aggregate demand. .

The new projections for the world's largest economy assume a revision of six tenths upwards for this year, largely reflecting statistical effects due to the higher-than-expected growth in the fourth quarter of 2023 and its effect on activity in 2024, while The previous forecast for 2025 has been improved by two tenths.

In contrast, although the IMF projects that growth in the euro zone will recover from 0.4% in 2023 to 0.8% in 2024 and 1.5% in 2025 as a result of higher household consumption and the decrease in the adverse effects of the energy 'shock', the new forecasts represent a worsening of one and two tenths for this year and the next, respectively.

The weakening of the recovery of the euro zone estimated by the Fund responds to worse expansion prospects for the main economies of the bloc, with the exception of Spain, which with a projected GDP growth of 1.9% in 2024 and 2 .1% in 2025 will once again stand out among the large European economies.

In the case of Germany, the IMF has revised its January forecast down four tenths, to 0.7% in 2024, and one tenth less for 2025, to 1.8%, while for France it now anticipates a expansion of 1.1% and 1.5%, respectively, with cuts of three tenths in both years of their previous forecasts.

Likewise, the Italian economy, the third largest in the euro zone, sees its growth forecast for this year significantly lowered, with 0.7% instead of the 1.3% anticipated in January, while for 2025 the IMF now forecasts an expansion of 0.6%, four tenths less.

"Growth in the euro area will recover, but from very low levels," says Gourinchas, who warns that continued high wage growth and persistent services inflation could delay inflation's return to target. although he considers that, unlike the United States, "there is little evidence of overheating", so the European Central Bank will need to carefully calibrate the turn towards monetary easing to avoid insufficient inflation.

Likewise, he warns that, although labor markets appear strong, that strength could prove "illusory" if European companies have been hoarding labor in anticipation of a rebound in activity that does not materialize.

In the case of emerging and developing economies, the new IMF forecasts contemplate an expansion of 4.2% this year and the next, which implies a slight upward revision of one tenth in 2024 and keeping the projection for 2025.

By country, the Fund has confirmed its latest GDP growth forecasts for China, with 4.6% in 2024 and 4.1% in 2025, while it has improved India's by three tenths for this year, to 6.8%, while next year's rate remains unchanged at 6.5%.

In the case of Russia, the new IMF projections anticipate a GDP expansion of 3.2% in 2024 and 1.8% a year later, with an upward revision of six and seven tenths, respectively, on the published forecasts in January.