No doom and gloom: Global recession risk has receded, IMF says
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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."
Go deeper: "Looks upbeat": How the U.S. economy reversed a gloomy narrative in a year
