IMF: India And China To Drive Nearly Half Of Global Growth In 2024

The International Monetary Fund (IMF) has released its latest World Economic Outlook (WEO) forecast, projecting global growth to align with the April 2024 forecast, at 3.2 percent in 2024 and 3.3 percent in 2025.

Inflation and Monetary Policy Challenges

Services inflation continues to impede disinflation efforts, complicating the normalization of monetary policy. This has heightened the risk of sustained high inflation, raising the likelihood that interest rates will remain elevated for an extended period amid ongoing trade tensions and increasing policy uncertainty.

Signs of Recession in the US

The forecast indicates that India and China will contribute about half of global growth in 2024. Among major advanced economies, growth appears more synchronized, with the Eurozone experiencing an acceleration. In contrast, the US is showing signs of a recession following a strong previous year.

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Japan’s Economic Challenges

Japan faced a negative growth surprise due to temporary supply constraints from the shutdown of a major automobile plant in the first quarter. Conversely, Europe is witnessing an economic recovery, driven by improvements in the services sector.

Robust Activity in China and India

China saw a resurgence in domestic consumption, leading to a positive rebound in the first quarter, supported by a temporary surge in exports linked to the global demand recovery at the end of last year.

These developments have somewhat reduced output divergences across economies, as cyclical factors have subsided and activity aligns more closely with potential.

Upward Revisions in Emerging Markets

Growth forecasts for emerging markets and developing economies have been revised upward, with strong activity in Asia, particularly China and India, driving these projections.

China’s Economic Outlook

China’s growth forecast for 2024 has been revised upward to 5 percent, primarily due to a surge in private consumption in the first quarter and strong exports. However, GDP is projected to slow to 4.5 percent in 2025 and continue to decline over the medium term, reaching 3.3 percent by 2029, as the economy faces challenges from an ageing population and subdued productivity growth.

India’s Economic Outlook

India’s growth forecast for this year has been revised to 7.0 percent, reflecting upward revisions for 2023 and improved prospects for private consumption, particularly in rural areas.