The International Monetary Fund (IMF) expects stable global growth and continued disinflation, IMF Managing Director Kristalina Georgieva said. The updated World Economic Outlook will be released on January 17, Georgieva said at a news conference.
Georgieva noted that the United States economy is performing “significantly better” than expected, but that high uncertainty about the trade policies of the incoming administration of President Donald Trump poses a challenge for the global economy and contributes to higher long-term interest rates.
With inflation approaching the US Federal Reserve’s target and with solid labor market indicators, the Fed may wait for more data before making a decision on further interest rate cuts, Georgieva said. She added that interest rates are expected to remain “somewhat higher for an extended period.”
Global Economic Outlook
The IMF’s updated forecast comes days before Trump’s inauguration. Georgieva did not provide detailed projections, but her comments provide a first glimpse into current global expectations.
In October last year, the IMF raised its economic growth forecasts for the United States, Brazil and the United Kingdom, while lowering expectations for China, Japan and the eurozone, citing risks such as potential trade wars, armed conflict and restrictive monetary policy.
At the time, the IMF left its global growth forecast for 2024 unchanged at 3.2%, while reducing its forecast for 2025 by 0.1%, warning that medium-term global growth would fall to 3.1% over the next five years, well below the pre-pandemic trend.
Regions under pressure
Georgieva stressed that uncertainty over future US trade policy was particularly pronounced and was creating additional challenges for the global economy, especially for countries integrated into global supply chains, middle-income economies and the Asian region.
Growth is expected to stagnate in the European Union, while India could see a slight slowdown, Georgieva said. Brazil faces slightly higher inflation, while China faces deflationary pressures and domestic demand challenges.
Low-income countries, despite reform efforts, remain vulnerable to new economic shocks, Georgieva added.
Challenges for central banks and fiscal policy
Georgieva noted that raising interest rates, while necessary to combat inflation, has not pushed the global economy into recession. However, inflation trends are divergent, requiring central banks to closely monitor local data.
A stronger US dollar could raise borrowing costs for emerging markets and low-income countries, she warned. Most countries need to reduce fiscal spending after heavy spending during the COVID-19 pandemic and implement reforms to ensure long-term growth.
“Countries cannot borrow to solve their problems. “They can only get out of this situation through growth,” Georgieva concluded, noting that medium-term forecasts for global growth are the lowest in decades, Reuters reported.
