Victory over inflation predominantly achieved
"The worldwide fight against inflation seems to have largely been triumphant, despite persistent price pressures in certain nations, according to the IMF's newest World Economic Outlook. In the majority of nations, inflation is now hovering near central bank objectives... The decrease in inflation without a global recession is an impressive accomplishment," the fund stated, issuing a word of caution that "vigilance remains paramount."
"Inflation in services remains excessively high, almost twice the pre-pandemic levels," it noted, specifying that several developing economies have restarted their interest rate increases due to a surge in inflation.
The IMF anticipates global inflation decreasing to 5.8% this year, a tad below its July projection of 5.9%, and eventually dropping to 3.5% by the close of the subsequent year, marginally under the average from the two decades prior to the pandemic.
The optimistic sentiment regarding consumer prices surfaces just before the US election, with inflation being a major concern for voters. Americans frequently list the economy and living expenses as their primary concerns, with many expressing feelings that their income no longer extends as far as it once did.
As per US Consumer Price Index data, goods and services cost around 20% more in August compared to February 2020, before the worldwide spread of Covid, despite the notable reduction in the rate of annual price increases since US inflation peaked at a 40-year high of 9.1% in 2022.
Although worldwide risks to inflation are lessening, economic growth perils are proliferating, according to the IMF.
"Downside risks are growing and now dominate the outlook," the agency proclaimed, mentioning the threat of higher commodity prices due to the Middle East conflict and governmental moves towards increased tariffs and protectionist industrial policies.
The IMF expects the global economy to expand 3.2% this year, in line with its July projection. However, the agency lifted its forecast for US growth to 2.8%, which is 0.2 percentage points higher than predicted three months ago.
In disheartening economic news for Europe, the economy covering the 20 countries that utilize the euro is forecasted to expand by only 0.8%, 0.1 percentage point below the predicted growth rate in July.
The IMF also decreased its 2024 growth forecast for China, where the government has introduced a variety of stimulus measures recently to aid the underperforming economy. The agency expects China’s economy to expand by 4.8% this year, 0.2 percentage points below its July forecast.
India is projected to grow at 7%, consistent with the prediction made three months ago.
The IMF emphasized that significant progress is required globally "to enhance growth prospects and boost productivity." It warned against trade policy measures intended to protect local industries and workers, arguing that these often provoke retaliation from other countries and fail to elevate living standards.
"Economic growth should instead stem from ambitious domestic reforms that enhance technology and innovation, strengthen competition and resource allocation, foster economic integration, and stimulate productive private investment," it advocated.
In light of the IMF's report, many developing economies have resumed raising interest rates due to escalating inflation. The global economy, however, is expected to expand at a modest 3.2% this year, despite the positive inflation outlook.
