The International Monetary Fund believes that there is a greater chance of a “soft landing” for the global economy

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CNN
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The International Monetary Fund sees better prospects for central banks to achieve this Taming inflation Without turning the global economy into recessionBut it warned on Tuesday that growth remains weak and incomplete.

The agency said it expects the global economy to grow by 3% this year, in line with July forecastas stronger-than-expected growth in the United States offset forecast cuts China And Europe. It lowered its 2024 growth forecast by 0.1 percentage point to 2.9%.

Pierre-Olivier Gorinchas, chief economist at the International Monetary Fund, told reporters that it was too early to assess the extent of the impact of the crisis. Latest conflict The conflict between Israel and Hamas – which has so far claimed at least 900 lives in Israel alone – could impact economic growth in the region and the rest of the world. He added that the International Monetary Fund was monitoring the situation, noting that the agency’s latest World Economic Outlook report had been completed before the outbreak of fighting.

Reiterating comments it made in July, the IMF highlighted the resilience of the global economy to the dual shocks of the pandemic and the Ukraine war, while warning in its report that risks remained “skewed to the downside.”

“Despite the disruption of energy and food markets due to war and unprecedented monetary tightening to combat high inflation in decades, economic activity has slowed but not stopped,” Gorinchas wrote in a blog post. “The global economy is faltering,” he added.

Gorinchas added that the IMF’s forecasts for growth and inflation “are increasingly consistent with a ‘soft landing’ scenario… especially in the United States.”

But he warned that growth “remains slow and uneven”, with weaker recoveries expected in much of Europe and China than forecast just three months ago.

The 20 countries that use the euro are collectively expected to grow by 0.7% this year and 1.2% next year, down 0.2 percentage points and 0.3 percentage points respectively from July.

The International Monetary Fund now expects China to grow by 5% this year and 4.2% in 2024, down from 5.2% and 4.5% previously.

“China Real estate sector crisis “The crisis could worsen, with spillover effects globally, especially for commodity exporters,” she said in her report.

By contrast, the United States is expected to grow more strongly this year and next than forecast in July. The International Monetary Fund raised its forecasts for US economic growth to 2.1% in 2023 and 1.5% in 2024 – an improvement of 0.3 percentage points and 0.5 percentage points, respectively.

The International Monetary Fund said, “The strongest recovery among major economies was in the United States.”

The agency expects inflation to continue to decline – reinforcing the “soft landing” situation in major economies – but does not expect it to return to the levels targeted by central banks until 2025 in most cases.

The International Monetary Fund revised its global inflation forecast to 6.9% this year and 5.8% next year – increases of 0.1 percentage point and 0.6 percentage point, respectively.

Commodity prices pose a “serious risk” to inflation expectations and could become more volatile amid climate and geopolitical shocks, Gorinchas wrote.

“Food prices remain high and could be further disrupted by the escalation of the war in Ukraine, causing greater hardship for many low-income countries,” he added.

Oil prices It rose on Monday Because of fears that the recent conflict between Israel and Hamas could cause broader instability in the oil-producing Middle East. Brent crude prices were already high after that Offer discounts By the main producers Saudi Arabia and Russia.

Rising oil and natural gas prices, which have sent energy costs skyrocketing, helped push inflation to multi-decade highs in many economies in 2022. The recent jump in oil prices could lead to a new wave of broader price hikes.

Gorinchas said on Tuesday that it was difficult to assess the extent to which the impact on oil prices would last. International Monetary Fund models indicate that a 10% increase in oil prices would raise the global inflation rate by about 0.4 percentage points. He added: “But I stress that it is too early to jump to any conclusions here.”

Bond investors already are On the edge of the abyss. They threw Government bonds last week on the hope that the world’s major central banks will keep interest rates “higher for longer” to bring inflation down to their targets.

The IMF also cited concerns that rising inflation could become a self-fulfilling prophecy. If households and businesses expect prices to continue to rise, this may prompt them to set higher prices for their goods and services, or demand higher wages.

The IMF noted that “expectations of higher inflation in the future could feed into current inflation rates, keeping them high.”

“The expectations channel is crucial to whether central banks are able to achieve the elusive ‘soft landing’ of bringing inflation to target without stagnation,” he added.

In a separate report, the International Monetary Fund said that financial stability risks remain high, although concerns about stress in the banking sector have eased since the bankruptcy of three US regional banks earlier this year and Credit Suisse was forced to take over the UBS operation. rescue.

“The rapid rises in global bond yields in recent weeks offer a glimpse into how suddenly financial conditions could tighten,” the agency said in its report on global financial stability.

“Moreover, although acute pressures in the global banking sector have eased, there are now signs of trouble elsewhere, with higher interest rates starting to have an impact, for example, by squeezing the repayment capacity of corporate and household borrowers.”

The IMF also said the prospect of higher interest rates for a longer period is leading to sharp declines in house prices in some countries.

She added that vulnerabilities in the commercial real estate sector “pose a significant risk to the financial sector,” and urged policymakers to assess the extent of the impact of the sharp decline in real estate prices. It can affect financial institutions.