The International Monetary Fund maintained its global growth forecast at 3.2 per cent for 2024, consistent with its July projection, according to its newly released World Economic Outlook (WEO).
"Added to the usual uncertainty about the outlook in advanced economies, a high level of uncertainty surrounds the global economic outlook," the report on Tuesday said.
Newly elected governments (about half of the world population has gone or will go to the polls in 2024) could introduce significant shifts in trade and fiscal policy, Xinhua news agency quoted the report as saying.
The return of financial market volatility over the summer has stirred old fears about hidden vulnerabilities. This has heightened anxiety over the appropriate monetary policy stance-especially in countries where inflation is persistent and signs of slowdown are emerging, it further said.
The report also said further intensification of geopolitical rifts may weigh on trade, investment, and the free flow of ideas. "This could affect long-term growth, threaten the resilience of supply chains, and create difficult trade-offs for central banks," it said.
When asked about his concern, IMF Chief Economist Pierre-Olivier Gourinchas said at a press conference that "rising geopolitical tensions are something that we are very concerned about," pointing out that there are two dimensions in the impact of that.
"So, one is, of course, if you increase tariffs, for instance, between different blocks, that will disrupt trade, that will misallocate resources, that will weigh down on economic activity," said Gourinchas.
"But there is also an associated layer that comes from the uncertainty that increases related to future trade policy and it will also depress investment, depress economic activity and consumption he continued.
The chief economist noted that the IMF found an impact on global output levels of approximately 0.5 per cent in 2026. "So it's a quite sizable effect of both an increase in tariffs between different countries and an increase in trade policy uncertainty," he said.
Global growth is projected to hold steady, but there are weakening prospects and rising threats, according to the latest WEO report.
The growth outlook is very stable in emerging markets and developing economies, at 4.2 per cent this year and next, with continued robust performance from emerging Asia, the report said.
Noting that the return of inflation near central bank targets paves the way for a policy triple pivot, Gourinchas said the first pivot-on monetary policy-is underway already.
The second is on fiscal policy, he said. "After years of loose fiscal policy in many countries, it is now time to stabilize debt dynamics and rebuild much-needed fiscal buffers," Gourinchas said.
The third, and this is probably the most difficult pivot, is toward growth-enhancing reforms, he said. "Much more needs to be done to improve growth prospects and lift productivity," he said.
Even if industrial and trade policy measures promote investment and activity in the short term, they often lead to retaliation and fail to deliver sustained improvements in standards of living", IMF Chief Economist said.
That will instead be "concrete steps" of economic growth, "coming from ambitious domestic reforms that boost technology and innovation, improve competition and resource allocation, further economic integration and stimulate productive private investment," he added.
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