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Why the IMF Is Feeling Better About the Global Economy

Why the IMF Is Feeling Better About the Global Economy

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Surprising Strength

There’s plenty to potentially weigh on the world economy this year: persistent inflation, high interest rates, economies teetering at the brink of recession, war, and concerns about energy costs. But according to the International Monetary Fund, there’s reason to be optimistic.

The institution raised its global growth forecast this week, partly because of the U.S. economy’s unexpectedly strong growth. In the fourth quarter of 2023, U.S. GDP grew at an annualized rate of 3.3%.

The IMF is now projecting 3.1% global growth in 2024, and 3.2% in 2025. This updated outlook includes projections of 2.1% growth in the U.S., 0.9% in both the eurozone and Japan, and 0.6% in the U.K.

Strong Consumer Spending

Several factors have helped the global economy prove more resilient than expected, first and foremost persistent, strong consumer spending. Easing supply chain issues, a dip in energy and commodity prices, and robust labor markets also helped. Plus, the IMF’s optimistic forecast was buoyed by stimulus spending in China, and better-than-expected results from large emerging markets like Brazil, and India.

While the updated predictions are a promising sign, there’s still reason to be cautious, per the IMF. For one, the revised estimates still put global growth below the 3.8% 2000-2019 average, and higher interest rates are expected to continue posing a challenge.

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