In its recently released World Economic Outlook report, the International Monetary Fund (IMF) raised its forecast for global consumer price growth to 5.8% next year, up from 5.2% three months ago, according to Bloomberg .
In most countries, the IMF predicts inflation will remain above central banks' targets until 2025.
Central banks in major economies have been raising interest rates aggressively for more than a year to rein in inflation, with prices rising as high as 8.7% globally in 2022 - the highest since the mid-1990s.
“Monetary policy needs to be tightened in most regions until inflation falls to target on a sustained basis,” said Pierre-Olivier Gourinchas, chief economist of the IMF.
The rise in inflation was driven by factors including supply chain disruptions due to Covid-19; fiscal stimulus in response to global shutdowns; tight labor markets in the US; and food and energy disruptions due to the conflict in Ukraine.
The call for caution about inflation comes as the IMF also cut its forecast for global economic growth in 2024, according to Bloomberg . The IMF forecasts global growth next year at 2.9%, down 0.1% from its outlook in July and below the 3.8% average of the two decades before the Covid-19 pandemic.
The IMF's forecast for 2023 is unchanged at 3%. While the outlook for global economic growth is low, it is relatively stable, and the IMF sees a higher chance that central banks can keep inflation in check without tipping the world into recession, according to Bloomberg .
However, the stability in the IMF's aggregate growth forecasts has masked some important changes in the individual country forecasts that underpin them.
The US, the world’s largest economy, raised its forecast for this year to 2.1% from 1.8% in July and next year’s estimate to 1.5% from 1%. The IMF forecast the US unemployment rate would peak at 4% in the fourth quarter of 2024 – lower than the 5.2% forecast in April, “consistent with a softer-than-expected US economic landing”.
Euro area growth estimates were cut to 0.7% through 2023 from 0.9% previously and to 1.2% in 2024 from 1.5%.
Japan’s economic growth this year is forecast to accelerate to 2% from 1.4% previously, supported by a surge in tourism, supportive policies and a recovery in auto exports that had been hampered by supply chains.
Minh Hoa (t/h)
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