In recent months, the IMF and other economic forecasters have raised their growth projections for 2024. The April World Economic Outlook showed revisions (+0.3% Global) that primarily affected the US, China and Emerging Markets (EM). These revisions were based on expectations of less economic scarring from the recent crisis, insufficient fiscal adjustment supporting short-term growth and less effective monetary policy transmission compared to the past.
Key takeaways
- The IMF outlook highlights the remarkable resilience in growth and declining inflation in most countries. However, the medium-term outlook remains subdued when compared to the pre-pandemic growth average.
- Although inflation is softening, its reduction remains a priority and central banks need to calibrate monetary policy at a country level.
- The tremendous optimism in financial markets based on the soft-landing narrative presents challenges: inflation persistence, compressed volatility and high correlation across assets with elevated fundamental uncertainty.
To further support economic performance, many countries have reintroduced industrial policies, driven by both economic and non-economic factors. Moreover, the IMF advocates the use of fiscal measures when necessary. These measures aim to enhance competitiveness, address climate change, strengthen supply chain resilience and bolster national security. The main sectors targeted are advanced technology, military/civil dual-use industries, low-carbon technology, steel and aluminium.
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