IMF forecast: Global growth holds steady at 3.2% as inflation eases

Global growth is expected to hold steady at 3.2 per cent through 2024 and 2025, with inflation on a downward trajectory, according to the International Monetary Fund’s (IMF) latest World Economic Outlook report released last week in Washington, DC.

IMF chief economist Pierre-Olivier Gourinchas noted that after peaking at 9.4 per cent in Q3 of 2022, inflation is expected to fall to 3.5 per cent by the end of 2025, marking significant progress toward central bank targets.

However, challenges persist as geopolitical uncertainties, trade tensions, and impending leadership changes in major economies present risks. Particularly, escalating crises — such as those in the Middle East — pose potential threats to commodity markets and could amplify global financial instability.

“These downside risks, together, represent about 1.6 per cent of global output in 2026,” Gourinchas cautioned, emphasising that economic headwinds could suppress growth and reverse recent inflationary gains.

IMF calls for policymakers to stabilise debt levels

The IMF also underscored the urgency for policymakers, especially in high-debt countries like the US and China, to stabilise debt levels and rebuild fiscal buffers. Delayed fiscal consolidation could result in “disorderly adjustments” to debt, while abrupt fiscal tightening risks suppressing economic growth.

“When countries have elevated debt levels and interest rates remain high, markets may intervene, leading to potentially uncontrolled adjustments that leave little room for policy flexibility,” Gourinchas warned.

As the global economy holds its ground, the IMF’s call for fiscal prudence and strategic debt management highlights the delicate balance required for sustained economic stability amid a shifting global landscape.

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