The IMF released its latest edition of the World Economic Outlook report this morning in Bangkok Thailand during IMF-WB Annual Meetings. The report states that the global economy remains resilient despite mounting challenges, but the outlook is becoming increasingly uneven across countries.
“The global economy continues to prove resilient, but this resilience is becoming increasingly uneven. Growth is projected at 3.1% this year and 3.4% next year. But beneath those aggregates, we see a growing divide. Countries benefiting from the AI-driven investment boom or favorable terms of trade are doing relatively well, while many energy importing and lower income economies are facing a much more challenging environment. We also expect inflation to be higher in the near term, reaching 4.7% this year, largely reflecting higher energy and food prices,” said Deniz Igan, Division Chief at the IMF’s Research Department.
That resilience, however, may not last indefinitely. The IMF warns that the buffers that helped economies absorb recent shocks are shrinking.
“The margins of adjustment that made global economy resilient to the negative shocks are rapidly narrowing. This keeps risk to the outlook tilted to the downside. Tensions in the Middle East could persist or escalate. Keeping energy and food prices elevated and adding pressure on growth and inflation. We also see risks from rising sovereign bond yields and renewed trade tensions. Risks surrounding AI are two-sided. There is the possibility that expectations around AI prove too optimistic, leading to financial market corrections. At the same time, there are upside possibilities if AI-driven productivity gains materialize sooner rather than later,” added Igan.
Against this backdrop, policymakers face difficult tradeoffs. The IMF says immediate challenges must be addressed without losing sight of long-term stability.
“The key post challenge is to navigate today's shocks without losing site of medium-term stability. Countries need to rebuild fiscal space without further delay, given high debt levels and rising borrowing costs. While ensuring that any support to households facing higher food and energy prices is temporary, targeted, and non-distortionary. Monetary policy should remain data dependent and tailored to country circumstances, including how exposed a country is to the disruptions from the war and to the technology upturn. And over the long term, strengthening energy security, improving AI readiness, and preserving open trade and cooperation will be essential,” explained Igan.
To read the full report, click here: World Economic Outlook Reports
