Pierre-Olivier Gourinchas, IMF: "The growth rate of the world economy remains modest"

The International Monetary Fund (IMF) yesterday improved its growth forecast for the world economy, anticipating a better evolution of the American economy and several important emerging economies, such as China and India, AFP and Reuters report.

The IMF's chief economist, Pierre-Olivier Gourinchas, said the new revised World Economic Outlook (WEO) report showed a soft landing was in sight, but overall growth and world trade remained lower than historical averages. "We have found that the world economy continues to display remarkable resilience and we are currently on the final slope of a soft landing, with steadily falling inflation and persistent economic growth. But the rate of growth remains modest and there could be turbulence ahead", said Gourinchas, according to Agerpres.

According to the updated data from the "World Economic Outlook" report, the world economy would register a 3.1% advance this year, compared to a 2.9% growth forecast in October. The growth forecast for 2025 was left unchanged at 3.2%. Comparatively, the historical trend for the period 2000-2019 was 3.8% on average.

In terms of inflation, the IMF maintained its October estimate that core inflation in 2024 will be 5.8%, but lowered its inflation forecast for 2025 to 4.4% from 4.6 % as much as he estimated in October. With the exception of Argentina, which is experiencing an inflation explosion, global core inflation will ease, Gourinchas said.

Regarding the world's main economies, the IMF estimates that the US would record an economic advance of 2.1% this year. On the other hand, economic growth in the euro zone will not exceed 1% (0.9%), again affected by Germany, in which case the GDP would increase by only 0.5%.

"We have to remember the extent of the shock suffered by several European countries starting from 2022. The energy shock, especially in Germany, was a very important one...However, the German economy demonstrated an incredible degree of resilience, recording performances weaker than other countries, such as the USA, but the nature of the shock was different", said Gourinchas.

Among the emerging countries, the IMF has revised its forecasts regarding the growth of the Chinese economy this year, up to 4.6%, from the 4.2% it initially estimated. Gourinchas said the revision reflected significant fiscal support from the authorities, as well as a less severe slowdown than initially expected from the real estate sector.

According to the IMF, emerging and developing economies should register a growth of 4.1% in 2024, and the forecasts for emerging Europe (a region where Romania is included) were improved by 0.6 percentage points, up to a up 2.8%, mainly thanks to better-than-expected growth in Russia amid high military spending related to the war in Ukraine. According to the IMF, the Russian economy would register an advance of 2.6% in 2024, 1.5 percentage points above the October forecast. The fund warns that there could be further revisions to the figures related to Russia because there are question marks about the extent of the fiscal incentives decided by Moscow.

Overall, Gourinchas says the global outlook reflects a more balanced balance of upside and downside risks, with the risk of wider conflict in the Middle East being counterbalanced by the prospect of lower fuel prices, which would help reduce faster than expected inflation.