The updated figure, released in the latest World Economic Outlook (WEO) report, is 0.2 percentage points higher than the International Monetary Fund‘s previous forecast in October.
“We had simultaneously less inflation and more growth,” IMF chief economist Pierre-Olivier Gourinchas told reporters ahead of the report’s publication.
“It’s not just a US story. There was a lot of resilience in many, many parts of the world in the last year and going into 2024,” he said, highlighting countries including China, Russia, Brazil and India.
Despite the upgrade, global growth is predicted to remain below its recent historical average of 3.8 per cent this year and next due to continued impacts of elevated interest rates, the withdrawal of pandemic-related government support, and persistently low levels of productivity.
Among the Group of Seven (G7) advanced economies, growth in European countries looks set to remain weak, reflecting ongoing challenges, while Japan and Canada are expected to fare slightly better.
The IMF’s overall inflation outlook remained unchanged at 5.8 per cent for 2024, but that masks a significant underlying shift between richer and poorer countries.
Inflation in advanced economies is now forecast to be 2.6 per cent in 2024, down 0.4 percentage points from October, while emerging and developing economies are expected to hit an annual inflation rate of 8.1 per cent, up 0.3 percentage points.
Much of the increase can be attributed to ongoing trouble in Argentina, where consumer price increases exceeded 200 percent last year amid an ongoing economic crisis.
The United States and China, the world’s two largest economies, both saw significant upgrades to their growth outlook for 2024, putting them on track for a less substantial slowdown than the IMF previously anticipated.
The IMF now expects the US economy to grow by 2.1 per cent in 2024 — an election year in which President Joe Biden is seeking a second term — down slightly from an estimated 2.5 per cent in 2023.
This is largely due to the “statistical carryover effects from the stronger-than-expected growth outcome for 2023,” the IMF said.
China’s economy is meanwhile on track to hit 4.6 per cent growth this year, down from 5.2 per cent last year.
The better-than-expected growth figures are down to property sector “difficulties” having a less severe impact than the IMF had anticipated, and also because of the “significant fiscal support coming from the authorities,” Gourinchas said.
An ongoing bright spot in the global economy continues to be India, which the IMF now expects to grow by 6.5 percent this year — up 0.2 percentage points from October — following an estimated growth rate of 6.7 per cent in 2023.
The Fund also increased the growth prospects for Russia, Iran and Brazil for the year ahead.
While many Asian economies remain buoyant, Europe continues to cast a long shadow over the global outlook, with the IMF highlighting “notably subdued growth in the euro area.”
Germany is once again set to be the slowest-growing G7 economy, expanding by just 0.5 per cent this year after contracting by an estimated 0.3 per cent in 2023.
The United Kingdom, France and Italy are all also expected to see growth of 1.0 per cent or less this year, while Spain’s economy is forecast to fare slightly better, growing by 1.5 per cent.
The tepid euro area growth reflects “weak consumer sentiment, the lingering effects of high energy prices, and weakness in interest-rate-sensitive manufacturing and business investment,” the IMF noted in the WEO report.
Despite some challenging forecasts, the overall picture in 2024 looks set to be less gloomy for many countries than it was in 2024: Every country cited in the WEO report save Argentina is set to have positive growth this year.
This is an improvement from 2023, when four out of the 30 economies cited in the report are estimated to have contracted, according to the IMF.