Apr 16, 2024 - Economy

The “Tepid Twenties”: IMF projects slow global growth this decade

Illustration of a tortoise with a shell made out of hundred dollar bills.

Illustration: Gabriella Turrisi/Axios

The era of rip-roaring global growth — with rapidly rising prices to match — is over. Now the global economy is transitioning to a steady but slow state, according to the International Monetary Fund.

Why it matters: The world has so far skirted doom-and-gloom forecasts of a global recession, with faster disinflation and more resilient growth than expected.

  • The global economy looks like it will settle somewhere in between the ultra-sluggish 2010s and the too rapid expansion of the early 2020s.
  • Meanwhile, the IMF called out huge fiscal deficits in the U.S. as a "particular concern" for the world economy.

By the numbers: The IMF projects the global economy will grow by 3.2% in this year and next — a similar pace to 2023.

  • The fund pointed to stronger-than-expected growth in the U.S., which it now predicts will grow 2.7% this year, over a percentage point higher than it anticipated last fall.
  • The IMF says global growth will come alongside easing price pressures: inflation among advanced economies is expected to be be 2.6% this year, half of what it was in 2023.

What to watch: "Somewhat worryingly, progress toward inflation targets has somewhat stalled since the beginning of the year. This could be a temporary setback, but there are reasons to remain vigilant," the IMF's Pierre-Olivier Gourinchas wrote in a blog Tuesday.

The big picture: Overall, the pace of expansion is expected to "remain low by historical standards," the IMF said in its report, citing lingering consequences from the pandemic, Russia's invasion of Ukraine, weak productivity growth and wider economic tensions around the globe.

  • Medium-term prospects for growth in world output and trade remain the lowest in decades, with the momentum toward higher living standards slowing for middle- and lower-income countries.

The intrigue: Gourinchas noted the strong economic performance in the U.S., thanks to increased productivity and a booming labor market. But he also sent a strongly worded warning about the nation's fiscal situation.

  • "The fiscal stance, out of line with long-term fiscal sustainability, is of particular concern," Gourinchas wrote. "It raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy.'
  • "Something will have to give," he added.

The bottom line: As global finance ministers and other economic policymakers readied trips to Washington, D.C., for this week's spring meetings, IMF managing director Kristalina Georgieva laid out the less-than-stellar outlook for the global economy.

  • "Without a course correction," Georgieva warned this decade would be remembered as the "Tepid Twenties."
  • But there is hope for a different moniker: "The Transformational Twenties," Georgieva said, as the world faces climate change and AI-driven digitization.
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