Washington (AFP)
Global growth is expected to increase slightly this year while remaining stuck below its pre-pandemic average, the IMF said Friday, flagging the growing economic divide between the United States and European countries.
In an update to its flagship World Economic Outlook report, the International Monetary Fund said it expects global growth to hit 3.3 % this year, up 0.1% point from its previous forecast in October, and to remain at 3.3% in 2026.
"Growth is steady," IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview, adding that it remained below the average global growth rate in the first two decades of the 21st century of 3.7%.
The IMF expects the global inflation rate to continue decelerating, reaching 4.2% this year and 3.5% in 2026, with prices cooling faster in advanced economies than in emerging markets.
Growing divergence
"Among advanced economies, the interesting development here is the strength and resilience and growth of the US economy," Gourinchas said, pointing to the IMF's decision to hike its outlook for US growth to 2.7% in 2025 and to 2.1% in 2026.
"The labour market has been strong, there is strong demand, private demand is robust, there is good confidence," he said.
One of the risks to the IMF's forecasts is policy uncertainty in the United States, where Donald Trump is preparing to return to the White House.
The IMF did not include the Republican president-elect's policy proposals in its forecasts and instead based its projections on existing US policies.
"The bottom line is, when we look at the risk for the US, we see an upside risk on inflation," he said.
The economic picture in the United States stands in stark contrast to the Euro area, where a sharp downgrade for Germany has dampened expectations for a rebound in growth.
The IMF now sees Euro area growth to increase slightly to 1.0% this year, and 1.4% in 2026, below its October forecasts.
"A number of countries, especially those who are concentrated in manufacturing and goods production, are still suffering," he said.
The Fund left its outlook for growth in Japan unchanged this year and next, and slightly increased its outlook for the United Kingdom in 2025.
In Russia, the IMF expects growth to slow sharply from 3.8% in 2024 to 1.4% this year, and to 1.2% in 2026.
'Rebalancing' in emerging markets
The IMF expects China's growth rate to continue cooling this year to 4.6%, up 0.1 percentage point from the October forecast, before easing to 4.5% next year.
The slight upgrade was due to the Chinese government's recently announced package of fiscal support to help prop up the slowing economy, which is struggling with an ongoing property market slump and uncertainty about trade policy once Donald Trump takes office next week.
The slowdown in growth in the world's second-largest economy is leading to something of a "rebalancing" among emerging markets, Gourinchas said, with countries including India -- which the IMF expects to grow by 6.5% this year and next -- playing a more important role.
Growth in the Middle East and Central Asia is expected to pick up by less than previously forecast due largely to the effect of oil production cuts by the OPEC+ group of oil-producing nations.
Economic activity is expected to rise more quickly in Latin America, the IMF said, adding that it also expected growth in sub-Saharan Africa to pick up this year.