The International Monetary Fund (IMF) has raised its 2024 economic growth forecast for the U.S. while trimming expectations for key global players such as China and the eurozone. The updated World Economic Outlook, released on Tuesday, projects U.S. growth at 2.8%, up two-tenths of a percentage point from July's forecast. This comes as strong consumer demand and rising wages continue to fuel the American economy. However, the IMF warned that significant risks remain, citing global geopolitical tensions, trade disputes, and the lingering impact of tight monetary policies.
While the IMF upgraded its outlook for the U.S., Brazil, and the United Kingdom, it cut growth projections for China, Japan, and the eurozone. The overall forecast for global growth in 2024 remains unchanged at 3.2%, reflecting a mixed picture as the world's largest economies grapple with a range of challenges. IMF chief economist Pierre-Olivier Gourinchas noted that the global fight against inflation has shown progress, but warned that risks, including potential new trade wars, remain substantial.
"Inflation pressures have eased in many countries, but the fight is not over," Gourinchas said in a blog post accompanying the report. He highlighted concerns that interest rate policies could become too tight, limiting growth and hurting employment, especially as inflation cools. "If inflation continues to drop, central banks will need to pay close attention to the impact on economic activity," Gourinchas told Reuters.
The U.S. economy, which has shown surprising resilience, was the standout in the IMF report. The upgrade was largely attributed to stronger-than-expected consumer spending, which has been boosted by rising wages and asset prices. The IMF's revised forecast projects that U.S. growth will slow slightly to 2.2% in 2025 but will remain stronger than many other advanced economies. This resilience has helped stave off recession fears, leading to what Gourinchas described as a "soft landing" where inflation cools without significant job losses.
Brazil also saw a sharp upward revision to its growth forecast, with the IMF now expecting the economy to expand by 3.0% this year, nine-tenths of a percentage point higher than the previous forecast. The upgrade was driven by robust private consumption and investment, helping to counterbalance concerns about tightening monetary policies. However, Mexico's growth outlook was revised downward by seven-tenths of a percentage point to 1.5%, as the effects of higher interest rates weigh on the economy.
In contrast, the IMF cut its forecast for China's 2024 growth to 4.8%, a two-tenths of a percentage point reduction from earlier projections. Ongoing weakness in the property sector and low consumer confidence were cited as key factors dragging down growth. The IMF noted that while China's fiscal stimulus plans could offer some support, the effects of those measures remain uncertain. The 2025 growth forecast for China was left unchanged at 4.5%.
Europe, particularly Germany, remains a concern for the global economy. Germany is expected to see zero growth this year, a reduction of two-tenths of a percentage point, as its manufacturing sector continues to face significant challenges. This slowdown is contributing to a broader malaise in the eurozone, where the IMF now projects 0.8% growth in 2024 and 1.2% in 2025.
Meanwhile, the United Kingdom saw a modest improvement in its growth outlook, with the IMF revising its 2024 forecast up by four-tenths of a percentage point to 1.1%. This upgrade is attributed to falling inflation and the prospect of lower interest rates stimulating consumer demand. However, Japan's growth outlook was lowered by four-tenths of a percentage point to 0.3%, reflecting ongoing challenges with supply disruptions.
India remains a bright spot, with the IMF maintaining its forecast for robust growth of 7.0% in 2024 and 6.5% in 2025, making it the fastest-growing major economy in the world.
In addition to its economic projections, the IMF outlined several key risks that could disrupt the global outlook. These include escalating geopolitical tensions, particularly in the Middle East and Ukraine, and the potential for trade wars. The IMF also raised concerns about the impact of rising global debt levels and the potential for fiscal instability in major economies such as the U.S. and China.
"While some industrial and trade policies may boost short-term investment, they often lead to retaliatory measures and do not deliver sustained improvements in living standards," Gourinchas said, cautioning against protectionist policies. Former President Donald Trump has already pledged to impose aggressive tariffs if elected, which many economists warn could provoke retaliatory actions and harm global trade.
The IMF also pointed to the need for countries to stabilize their fiscal policies, particularly in the wake of expansive government spending during the pandemic and cost-of-living crises. Gourinchas highlighted that the U.S. and China, two of the world's largest economies, are not doing enough to address their fiscal challenges. "In many countries, including the U.S. and China, current fiscal plans do not stabilize debt dynamics," Gourinchas said, adding that a failure to consolidate debt could lead to disorderly market adjustments.
