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The International Monetary Fund (IMF) maintains global growth estimatesbut it shows slightly more optimistic for the Eurozonenow hoping that the economy of all the countries of the single European currency grow 0.9% this year.
In the update to ‘World Economic Outlook’the annual report with global economic estimates, released this Tuesday, July 16, the IMF barely changes the indicators it presents. In global terms, and as expected in April, it continues to predict that the world economy will grow by 3.2% this year.. And it slightly increases (by 0.1 percentage points) the growth estimate for 2025, putting the global economy at 3.3%.
But despite the global estimate remaining the same, the IMF itself states that “below the surface there have been remarkable developments” since April, when it presented its latest projections.
Looking at the large economic blocs, the Fund maintains growth forecasts for all advanced economiesexpecting them to advance 1.7% this year and 1.8% next year. But it showsif less optimistic for the United States and Japan. The entity now expects that they will grow this year, respectively, 0.1 percentage points less (to 2.6%) and 0.2 (to 0.7%) than anticipated in April.
“The United States is showing signs of cooling, especially in the labor market, after a strong 2023,” says the IMF.
In between the upward revisions (slight) are the Eurozone. The IMF estimates that the single currency economy will grow by 0.9% this year and 1.5% in 2025, anticipating better performances from the French and Spanish economies.After near stagnation last year, the Eurozone economy is set to accelerate“, he highlights. The growth forecast in France was improved by 0.2 points, to 0.9%, and that of Spain by 0.5 points, to 2.4% this year.
On the other hand, the Fund has revised its growth estimate for the bloc of major emerging and developing economies upwards by 0.1 points. It now expects them to grow by 4.4% together, both this year and next. In the Caribbean, Middle East and Sub-Saharan Africa, the outlook is for a downward revision, while in emerging and developing Asia the opposite is true. The institution sees China and India growing more than expected. The upward revisions are 0.4 and 0.2 percentage points, to rates of 5% and 7% this year, respectively. And he emphasizes that they continue to be the main driver of the global economy.
Disinflation progress slows
Num article accompanying the WEO updatethe Economic Counselor and Director of the IMF’s Research Department, Pierre-Olivier Gourinchas, is however concerned about the slowdown in the disinflation process.
“As in April, we estimate a slowdown in global inflation to 5.9% this year, compared to 6.7% last year, in line with a soft landing. But in some advanced economies, especially the United States, disinflation progress has slowed, and risks have increased,” says Gourinchas.
At stake are two risks, which have become “more prominent”: although inflation has declined without a recession, “the bad news is that energy and food prices are close to pre-pandemic levels in many countries, while overall inflation has not“.
One reason, the IMF economist points out, is that the prices of goods remain high relative to services, a legacy of the pandemic. This makes services comparatively cheaper, which increases their relative demand – and, by extension, the need for labor to produce them. “It is putting pressure on prices and wages in services“, Gourinchas advised.
Therefore, he highlights, “service prices and wage inflation are two areas of concern with regard to the disinflation path”. Unless the prices of goods fall further, “raising service prices and wages could keep overall inflation higher than desired and even without further shocks, this could be a significant risk to a soft landing scenario,” the IMF director stresses.
Gourinchas also warns that the risk of budgetary challengesespecially in the United States, and the “dismantle” the international trade exchange system. “Our trading system is imperfect and can be improved, but this increase in unilateral measures does not help global prosperity,” he concludes.
Source: www.jornaldenegocios.pt
