No doom and gloom: Global recession risk has receded, IMF says
Gone are the gloomy warnings of an imminent global recession. Economists at the International Monetary Fund see improving results, on both inflation and growth, compared with just a few months ago.
Why it matters: The world survived the great inflation shock better than many had anticipated. Price pressures have receded, and high interest rates didn't crush global activity.
- Now central banks are turning an eye toward lowering those interest rates — possibly further relieving any lingering strain on the global economy.
Driving the news: The IMF says the global economy will likely grow 3.1% this year, with a similar rate of growth in 2025, according to its latest World Economic Outlook released Tuesday morning.
- The 2024 growth is a slight upgrade (of 0.2 percentage points) from what forecasters anticipated in October, thanks to resilience in the U.S. economy and stronger activity in developing and emerging market nations.
- The IMF also notes expected government support in China that could put a floor under the country's economy.
What they're saying: "We're very far from a global recession scenario," IMF chief economist Pierre-Olivier Gourinchas told reporters Tuesday morning.
- Of course, risks remain — including an expansion of the geopolitical conflict in the Middle East. Still, Gourinchas added: "I'm fairly confident that the risk of a global recession would be fairly minimal at this point."
Between the lines: The IMF says central banks face a delicate decision of when to lower interest rates. "Central banks must now avoid a premature easing that would undo hard-earned credibility and lead to a rebound in inflation," Gourinchas told reporters.
- "But they must also avoid waiting too long as signs of strains are growing in interest rate-sensitive sectors, such as construction, and loan activity has declined markedly in many countries."
The intrigue: The IMF notes that the better-than-expected growth forecast is still slower than the 3.8% average global growth over the past two decades.
- But economic conditions look different this decade. For one, interest rates are high to combat inflation.
- The IMF also cites the "withdrawal of fiscal support amid high debt," which it says is weighing on economic activity, and "low underlying productivity growth."