IMF: Global Economy Stays Resilient Yet Faces a ‘Dim’ Outlook

The International Monetary Fund (IMF) has released a report indicating that the global economy demonstrates “unexpected resilience” amid ongoing trade tensions and new tariff policies. However, the outlook for economic growth remains “dim,” due to various uncertainties.

IMF Forecasts for Global Economic Growth

During its annual meetings in Washington, the IMF upgraded its projection for global GDP growth for this year to 3.2%, an increase from the previous estimate of 3% in July. The forecast for 2024 remains at 3.1%.

• Global GDP growth 2023: 3.2%
• Global GDP growth 2024: 3.1%
• UK GDP growth 2023: 1.3% (previously 1.2%)
• UK GDP growth 2024: 1.3% (unchanged)

Concerns Over Trade Policies

The IMF stated that protectionist measures have had limited immediate impacts on economic activity and prices. However, they emphasized that the long-term effects of such tariffs may soon start to emerge.

The IMF’s World Economic Outlook highlights that uncertainty stemming from Brexit and other major policy shifts is influencing investment decisions. Business investment rose after the UK’s EU withdrawal but has been declining since 2018.

Risks to US Economic Growth

In the report, the IMF expressed concern over potential risks to US economic growth due to stricter immigration policies. The organization estimates that GDP in the US could decrease by 0.3% to 0.7% as a result of these policies, leading to inflation spikes in sectors heavily reliant on immigrant labor.

• Sectors vulnerable to inflation pressures:
  • Construction
  • Hospitality
  • Personal services
  • Agriculture

UK Economic Outlook

The IMF also revised its growth forecast for the UK, which is now predicted to be the second-fastest growing economy in the G7 this year, only trailing the US. However, inflation is projected to rise, anticipating an average of 3.4% in 2025, signaling potential economic challenges ahead.

Future Investment Trends

Furthermore, the IMF warned of potential corrections in stock prices which could negatively impact investment. The report notes that high valuations in the stock market have raised concerns about a downturn in sectors related to generative AI and data center investments.

IMF Chief Economist Pierre-Olivier Gourinchas highlighted the temporary factors contributing to rising UK inflation but noted underlying risks. Strong wage growth and changing inflation expectations could further complicate the economic landscape.

As policymakers navigate these challenges, the international economic outlook remains cautious, with significant uncertainties looming for both the global and UK economies.