This article was originally published on 11 Oct 2023.
According to the latest World Economic Outlook (WEO) from the International Monetary Fund (IMF), China and the EU are identified as the weak points in the global economy for 2024, with the US playing a stabilising role.
China's ongoing property crisis remains a concern, while the impact of the Israel-Hamas conflict on the global economy remains uncertain. The IMF has revised down its growth forecasts for China and the euro area, despite acknowledging the remarkable strength of the American economy.
The IMF predicts global real GDP growth of 3.0% for 2023, with a slight reduction to 2.9% for 2024. The United States is expected to see growth of 2.1% in 2023 and 1.5% in 2024, while China's GDP growth is projected at 5.0% for 2023 and 4.2% for 2024, primarily due to its real estate crisis and weak external demand.
IMF Chief Economist Pierre-Olivier Gourinchas emphasises the need for decisive action in China to address the real estate sector's challenges. Concerns are growing as some Chinese developers, including China Evergrande and Country Garden Holdings, face financial difficulties.
The IMF also lowers growth estimates for the euro area and the UK. Japan is expected to see growth of 2.0% in 2023, driven by various factors.
While the global economy is recovering from past crises, it faces uncertainties related to China's real estate crisis, volatile commodity prices, geopolitical tensions, and inflation. The escalation in the Israel-Palestinian conflict is another emerging risk.
Despite the resilience of the global economy, it is still grappling with the impacts of the pandemic, regional conflicts, and other challenges, which are hindering stronger growth.
The IMF anticipates a gradual decline in inflation but warns of potential spikes if Middle East tensions affect the oil market. Core inflation is also expected to decrease gradually.
Labor markets are generally strong, but there is no evidence of a wage-price spiral triggering significant inflation.
The IMF acknowledges reduced uncertainty compared to earlier forecasts but highlights more downside risks than upside potential for 2024.
Investment levels remain below pre-pandemic levels, with businesses displaying caution amid rising interest rates, reduced fiscal support, and stricter lending conditions.
