The International Monetary Fund (IMF) is set to project stable global growth and continued disinflation in its updated World Economic Outlook scheduled for release on January 17, according to IMF Managing Director Kristalina Georgieva.
Speaking to reporters, Georgieva highlighted better-than-expected performance in the U.S. economy, citing a stable labor market and inflation nearing the Federal Reserve’s target. However, she expressed concerns about uncertainty stemming from the incoming administration of President-elect Donald Trump, particularly regarding trade policies. This uncertainty, she noted, was driving higher long-term interest rates, creating headwinds for global growth.
“The uncertainty around tariffs, taxes, deregulation, and government efficiency is especially significant for countries deeply integrated into global supply chains, such as those in Asia and medium-sized economies,” Georgieva said.
Interest Rate Outlook and Regional Divergences
With inflation stabilizing, Georgieva suggested the Federal Reserve could afford to delay further interest rate cuts. She added that overall interest rates were expected to remain elevated for an extended period.
The IMF’s update will be its first significant economic outlook of the year. While Georgieva did not provide specific growth forecasts, she emphasized divergent regional trends. Growth is expected to weaken slightly in India and stall in the European Union. In contrast, Brazil faces higher inflation, while China grapples with deflationary pressures and subdued domestic demand.
In its October report, the IMF left its global growth forecast for 2024 unchanged at 3.2% but reduced its 2025 projection slightly to 3.1%. Georgieva reiterated concerns that medium-term global growth could remain below pre-pandemic levels.
Challenges for Lower-Income Countries
Lower-income nations, despite implementing reforms, remain vulnerable to economic shocks, Georgieva warned. These countries face heightened risks from rising interest rates and a strong U.S. dollar, which could increase their borrowing costs.
“Countries cannot borrow their way out. They can only grow out of this problem,” she said, urging nations to prioritize fiscal discipline while protecting growth prospects through structural reforms.
Economic Resilience Despite Inflation Pressures
Georgieva noted the resilience of the global economy, which has managed to avoid recession despite higher interest rates. However, she pointed out the divergence in inflation trends across regions, necessitating careful monitoring by central banks.
The IMF update comes at a critical time as the global economy navigates the dual challenges of geopolitical tensions and economic uncertainty. Georgieva emphasized that addressing these challenges would require coordinated fiscal policies and sustainable growth strategies.
