Although there are shadows, this time the light prevails. “The clouds are beginning to part,” says Pierre-Olivier Gourinchas, director of the research department of the International Monetary Fund (IMF), with an unusual poetic tone. His comment underscores the improving global economic outlook in the new report the IMF presented this Tuesday. This document emphasizes that the moderation of inflation and firm growth paves the way for a soft landing after a succession of crises and a very restrictive monetary policy to combat inflation, which has less affected the labor market and economic activity. Strong public and private spending sustained this activity, despite strict monetary conditions.
One of the most striking things is the boost in Russia’s economy. The IMF improves its forecasts for 2024 by 1.5 points, the largest increase considered by this organization, despite the war in Ukraine and international sanctions. The forecast is that its gross domestic product (GDP) will grow by 2.6% in 2024 and 1.1% in 2025, thanks to the increase in military spending and private consumption.
Another of the notable forecasts is the one that refers to Argentina. The IMF drastically revises its estimates for 2024 downwards and points to a 2.8% drop in the economy, under the effect of the austerity measures of the ultra-liberal Milei Government. The IMF’s forecasts from last October spoke of a 2.8% increase in GDP this year, after the 1.1% fall in 2023. Now, in any case, the Fund considers that Argentina will recover strongly in the 2025, with an expected growth of 5%.
Global growth will be 3.1% in 2024 and 3.2% in 2025, which represents an increase for this year of two tenths compared to the previous forecast. But the Fund, in its usual tendency to contain joy just in case, reminds that “the pace of expansion remains low” and that turbulence is on the horizon. For this reason, the forecasts for the 2024-25 binomial are lower than the historical average of 3.8% (2000-2019).
In this context, the projection lowers Spain’s growth by 2024 by two tenths compared to the forecast three months ago. According to this new prediction, after it also lost three tenths in October, the Spanish economy will remain at 1.5% this year and will remain at 2.1% next year. Despite this setback, Spain continues to be the most expanding economy in Europe, ahead of Germany, France, Italy and the United Kingdom. The euro zone remains at 0.9% in 2024 and at 1.7% in 2025.
Furthermore, its decline is less than expected for the euro zone, which falls three tenths compared to the previous report, mainly due to the effects derived from the 2023 results, which are worse than expected.
The improved global outlook compared to October is due to greater-than-expected resilience in the United States, with growth in the last quarter of 2023 well above expectations, and in several emerging market economies, as well as stimulus tax in China.
In general, even greater growth does not occur due to the high interest rates of monetary policy to attack inflation, the withdrawal of fiscal support in an environment of high debt and the low growth of underlying productivity. However, Gourinchas cleared up the persistent doubt in recent times among economists. “With growth of 3.1%, the scenario of a recession is very far away,” he said.
The IMF insists that the authorities face in the short term the challenge of successfully managing the final decline in inflation by calibrating monetary policy. But he adds that stock markets seem too optimistic about early interest rate cuts. The report predicts that central banks will maintain rates until the second half of 2024.
