For the IMF, the world economy proved surprisingly resilient during the 2022–2023 global disinflation associated with tight monetary policy in most advanced economies (AEs) and in emerging market and developing economies (EMDE). 

In its basic scenario, released in Apr'24, the Fund projects global growth in 2024–2025 at the same pace recorded in 2023, that is, 3.2%. Compared to the previous scenario (Jan'24), there was a very marginal revision for 2024 output, of +0.1 percentage point (p.p.), while the projection for 2025 did not change.

In forecasts from other institutions, also recently released, 2024 global GDP expansion is expected to reach 3.1%, according to the OECD (May'24), and 2.6%, according to UNCTAD (Apr'24). For 2025, the OECD projects a performance of 3.2%, the same rate estimated by the IMF.

The convergence between groups of countries, according to the IMF scenario, should be small from 2023 to 2024. The AEs' GDP is expected to grow 1.7% in 2024 versus 1.6% in 2023. This projection is 0.2 p.p. higher than that of Jan'24, reflecting the upward revision of growth in the US, which more than offset the downward revision for the Euro area. For 2025, growth should accelerate to 1.8% in this group of countries, with no change compared to the Jan'24 scenario.

For emerging market and developing economies, the IMF forecasts a tenuous deceleration from 4.2% in 2023 to 4.1% in 2024 and 2025. In this case, only 2024 changed in relation to the projections released in Jan'24: +0.1 percentage point. The forecast for 2025 remained the same.

As was already the case for this group of countries (Letter IEDI n. 1200), the Fund assesses that important regional disparities will continue to occur. In the current scenario, stronger GDP growth in the Middle East, Central Asia and Sub-Saharan Africa will not be enough to offset the expected slowdown in Emerging and Developing Asia, Emerging and Developing Europe and Latin America and the Caribbean. 

Among the EMDEs, the weakest performance, according to the IMF, will be recorded by Latin American GDP: +2.0% in 2024, implying a slowdown compared to 2023 (+2.3%). This projection, however, was adjusted by +0.1 p.p. compared to that of Jan'24.

Brazil will contribute to this loss of dynamism in the region, as its GDP is expected to grow 2.2% in 2024 compared to 2.9% in 2023, but it is Mexico that stands out for a greater loss of momentum: from 3.2% in 2023 to 2.4% in 2024. For these two countries, the forecasts revision went in the opposite direction: +0.5 p.p. in the Brazilian case and -0.3 p.p. in the Mexican case compared to the scenario of Jan'24.

For 2025, the GDP of Latin America and the Caribbean is expected to gain speed, registering +2.5%, despite a new slowdown in Brazil (+2.1%) and mainly in Mexico (+1.4%). Even so, it is worth noting that the upward revision of the Brazilian performance by +0.2 p.p. in relation to the rate expected in Jan'24.

Still in the group of emerging and developing countries, it is important to highlight China's evolution for the coming years, given its weight in our foreign trade and its influence on the evolution of the international prices of commodities we export.

The Fund estimates that the Chinese economy will have a progressively weaker dynamism in the coming years, although its projections have not changed in relation to the Jan'24 scenario: 5.2% in 2023, 4.6% in 2024 and 4.1% in 2025. In Asia, although also losing pace, India should perform better: 6.8% in 2024 and 6.5% in 2025.

Thus, if the picture expected by the IMF is confirmed, the pace of expansion of the world economy will remain below the pre-pandemic historical average: +3.2% in 2024–2025, as previously seen, compared to +3.8% per year between 2000 and 2019. The differential, according to the Fund, is due to the long-term effects of the COVID-19 crisis, but also to the conflicts in Ukraine and the Middle East, the growing geopolitical fragmentation and the weak increase in productivity.

The evolution of global trade in goods and services is expected to improve in the coming years, but it is expected to fall below the pre-pandemic pace and below world GDP. In the base scenario, the IMF projects a 3% increase in 2024 and 3.3% in 2025 versus the virtual stability of 2023 (+0.3%). The average annual growth rate of the two decades before the pandemic (2000-2019), on the other hand, reached 4.9%.

Other hypotheses of the IMF reference scenario include a fall in energy commodity and oil prices, helping to cool global consumer inflation (from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025), making room for a path of reduction in base interest rates in AEs from the second half of 2024.

In addition, the IMF expects AEs to adopt a more restrictive fiscal policy in 2024, while in the EMDEs fiscal policy orientation should be, on average, neutral, with a small contractionary bias in 2025 only.

The threat of an adverse evolution of the global economy has decreased since Oct'23, resulting in a more neutral balance of risks. This contributed to faster than expected reductions in inflation in several countries. However, several adverse risks remain plausible, according to the Fund. 

Among the factors that can depress world economic dynamism are: a new spike in commodity prices in the context of regional conflicts; persistent inflation and financial stress; faltering Chinese recovery; disruptive fiscal adjustment and debt crisis; lack of confidence in the government eroding the pace of reforms; intensifying geopolitical fragmentation.

On the positive side, expansionary factors that may occur include: increased public spending due to elections; supply-side surprises that reduce inflation; increased productivity due to artificial intelligence; and a push for structural reforms.

According to the IMF, as the global economy heads toward a “soft landing,” central banks' short-term priority is to ensure that inflation slows down gradually. 

At the same time, with monetary policy stance becoming less tight, a renewed focus on fiscal consolidation is needed to restore room for maneuver in the budget, prioritize investments, and ensure debt sustainability. 

In addition, intensifying reforms that improve the supply side of the economy would facilitate the reduction of inflation and indebtedness, allow economies to return to pre-pandemic growth rates, and accelerate convergence toward higher income levels. 

Strengthening multilateral cooperation, in turn, is necessary to limit the risks and costs of geopolitical fragmentation and climate change, accelerate the transition to green energy, and encourage debt restructuring in EMDEs.

The full text is available in Portuguese.