IMF forecasts good economic outlook for China, India and Europe

WASHINGTON (AP) — The International Monetary Fund on Tuesday raised its economic outlook for this year for China, India and Europe and modestly lowered its expectations for the United States and Japan. But it said global progress against rising prices has been slowed by more persistent than expected inflation in services from air travel to restaurant meals.

Overall, the IMF expects the global economy to grow by just 3.2% this year, unchanged from its April forecast and slightly below the 3.3% growth in 2023.

“Global growth remains stable,” Pierre-Olivier Gourinchas, chief economist at the IMF, told reporters.

Still, the expansion of the global economy remains paltry by recent historical standards. From 2000 to 2019, before the pandemic upended economic activity, global growth averaged 3.8% per year.

The IMF, a lending organization made up of 190 nations, works to promote economic growth and financial stability, as well as to reduce global poverty.

Gourinchas estimated that China and India would account for nearly half of global growth this year.

Partly because of a surge in Chinese exports in early 2024, the IMF raised its growth forecast for China this year to 5% from 4.6% in April, but down from 5.2% in 2023. The IMF forecast was released before Beijing reported Monday that China’s economy, the world’s second-largest after the U.S., grew at a slower-than-expected 4.7% pace from April to June, down from 5.3% in the first quarter of the year.

China’s economy, which once grew steadily at a double-digit annual pace, faces significant challenges, notably a slumping property market and an aging population that has left the country with a labor shortage. By 2029, Gourinchas wrote, China’s growth will slow to 3.3%.

India’s economy is forecast to expand 7%, up from the 6.8% the IMF forecast in April, partly due to stronger consumer spending in rural areas.

The IMF said “sprouts of recovery have materialized in Europe,” which has been hit by high energy prices and other economic damage from Russia’s invasion of Ukraine that began in 2022. Citing a surge in Europe’s services business, the IMF raised its growth forecast for the 20 countries that share the euro by a tenth of a percentage point to 0.9%, compared with its April forecast. In 2023, the eurozone grew 0.5%.

However, a weak first quarter in the United States prompted the IMF to cut its growth forecast for the year to 2.6% from 2.7% in April.

The IMF also cut its 2024 growth outlook for Japan to 0.7%, down from 0.9% in April and 1.9% in 2023. Japan’s first-quarter growth was disrupted by the closure of a major auto plant, the IMF said.