Himal Press 
KATHMANDU: The International Monetary Fund (IMF) has projected the global economy to grow at 3.1% in 2024 and 3.2% in 2025.
The projection made in the January update of the World Economic Outlook for 2024 is 0.2 percentage point higher than in the update of October last year 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%, 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 IMF said in a statement issued on Tuesday. “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% in 2024 and to 4.4% in 2025, with the 2025 forecast revised down.”
IMF has said that the likelihood of a hard landing has receded, and risks to global growth are broadly balanced, thanks to disinflation and steady growth. “On the upside, faster disinflation could lead to further easing of financial conditions. Looser fiscal policy than necessary and than assumed in the projections could imply temporarily higher growth, but at the risk of a more costly adjustment later on. Stronger structural reform momentum could bolster productivity with positive cross-border spillovers,” it said. “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.”
As per the January update, growth in emerging and developing Asia is expected to decline from an estimated 5.4% in 2023 to 5.2% in 2024 and 4.8% in 2025, with an upgrade of 0.4 percentage point for 2024 over the October 2023 projections, attributable to China’s economy. “Growth in China is projected at 4.6% in 2024 and 4.1% in 2025, with an upward revision of 0.4 percentage point for 2024 since the October update. The upgrade reflects carryover from stronger-than-expected growth in 2023 and increased government spending on capacity building against natural disasters,” it said. Growth in India is projected to remain strong at 6.5% in both 2024 and 2025, with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand.
According to the IM, policymakers’ near-term challenge is successfully managing the final descent of inflation to target, calibrating monetary policy in response to underlying inflation dynamics and—where wage and price pressures are clearly dissipating—adjusting to a less restrictive stance. “At the same time, in many cases, with inflation declining and economies better able to absorb effects of fiscal tightening, a renewed focus on fiscal consolidation to rebuild budgetary capacity to deal with future shocks, raise revenue for new spending priorities, and curb the rise of public debt is needed,” it added.
