WASHINGTON: The International Monetary Fund (IMF) is preparing to unveil its latest World Economic Outlook on January 17, with projections of steady global growth and a gradual decline in inflation, according to IMF Managing Director Kristalina Georgieva.
Speaking on Friday, Georgieva highlighted that the US economy is performing “better than anticipated” but flagged significant uncertainty surrounding trade policies under President-elect Donald Trump’s incoming administration. This unpredictability, she noted, is creating headwinds for the global economy and driving long-term interest rates upward.
With US inflation nearing the Federal Reserve’s target and the labor market showing stability, Georgieva suggested the Fed could afford to delay further interest rate cuts, emphasizing that overall rates are likely to remain elevated for an extended period.
The IMF’s updated outlook, set to release just days before Trump assumes office, will provide a clearer picture of global economic trends. However, Georgieva did not share specific projections.
In its October report, the IMF had raised growth forecasts for the US, Brazil, and the UK while trimming expectations for China, Japan, and the eurozone, citing risks such as trade tensions, geopolitical conflicts, and tighter monetary policies. At the time, the global growth forecast for 2024 remained steady at 3.2%, while the projection for 2025 was reduced slightly to 3.1%, reflecting concerns over medium-term growth trends falling below pre-pandemic levels.
“There is heightened global interest in the policy directions of the incoming US administration, particularly around tariffs, taxes, deregulation, and government efficiency,” Georgieva said. “This uncertainty, especially concerning trade policies, poses challenges for globally integrated economies, medium-sized nations, and Asia as a region.”
Georgieva described the unusual economic scenario where long-term interest rates are rising despite declines in short-term rates, a trend unseen in recent history.
The IMF foresees mixed regional growth trends: stagnation in the European Union, a slight slowdown in India, and higher inflation pressures in Brazil. China, the world’s second-largest economy, faces deflationary challenges and subdued domestic demand. Meanwhile, lower-income countries remain vulnerable to economic shocks despite reform efforts.
Notably, Georgieva observed that despite higher interest rates aimed at curbing inflation, the global economy has avoided a recession. However, divergent inflation patterns call for localized monitoring by central banks.
The strong US dollar, Georgieva cautioned, could raise borrowing costs for emerging markets and low-income countries. She stressed the importance of fiscal discipline following pandemic-era spending surges and called for structural reforms to ensure sustainable growth.
“Countries cannot borrow their way out of economic challenges; they must grow their way out,” she said, warning that medium-term global growth prospects are at their weakest in decades.
