The United States remains the main engine of global growth

The International Monetary Fund (IMF) recently said that the US economy will continue to be the main driver of global growth for the rest of this year and into 2025, with strong consumer spending despite a period of high inflation and rising interest rates to control inflation.

In its latest World Economic Outlook, the IMF raised its 2024 and 2025 economic growth forecasts for the United States – the only advanced economy to see its outlook revised upward for both years. The IMF's chief economist said the Federal Reserve's desired "soft landing" – that is, reducing inflation without causing major damage to the labor market – has essentially been achieved.

A woman enjoys the day at a park with the New York skyline in the background, in Hoboken, New Jersey, United States. Photo: Reuters

The IMF also gave positive forecasts for strong emerging economies such as India and Brazil, while revising down its growth expectations for China this year and keeping its forecast for next year unchanged at 4.5%, below its average growth trend.

However, the IMF warned of many potential risks from armed conflicts, the threat of new trade wars and the consequences of tight monetary policies that the Fed and other central banks have adopted to control inflation.

The United States is leading developed economies in growth for the second consecutive year, according to a report by the IMF, said Lael Brainard, director of the White House National Economic Council, in a recent statement.

The IMF's latest World Economic Outlook report said the changes would keep global GDP growth in 2024 at 3.2% as forecast in July, creating a bleak growth outlook when world finance leaders meet in Washington this week for the annual meetings of the IMF and World Bank.

Global growth is forecast to reach 3.2% in 2025, down a tenth of a percentage point from the July forecast, while medium-term growth is expected to slow to an average of 3.1% over the next five years, well below pre-pandemic levels, the report said.

However, IMF chief economist Pierre-Olivier Gourinchas said some countries, including the United States, were showing signs of a rapid recovery.

“The news out of the United States is very positive in a sense,” Gourinchas said at a news conference in Washington. “The labor market picture remains quite solid, although it has cooled a bit.”

“I think the risk of a recession in the United States, barring a very strong shock, will be somewhat reduced,” he said.

While Gourinchas said it appeared the global fight against inflation had been largely won, he told Reuters in an interview that monetary policies risked becoming too tight without interest rate cuts in some countries as inflation eased, which could hurt growth and jobs.

The power of consumers

The IMF revised its 2024 US growth forecast up two-tenths of a percentage point to 2.8%, largely on stronger-than-expected consumption, driven by rising wages and asset prices. It also raised its 2025 US growth forecast to 2.2%, up three-tenths of a percentage point.

The growth forecast for Brazil has been upgraded sharply by nine-tenths of a percentage point, bringing this year's projected growth rate to 3.0%, also thanks to strong private consumption and investment growth. Meanwhile, Mexico's growth has been revised down by seven-tenths of a percentage point to 1.5% due to the impact of tighter monetary policy.

The IMF has cut its growth forecast for China in 2024 to 4.8%, down two-tenths of a percentage point, with support from net exports partly offsetting continued weakness in the property sector and a lack of consumer confidence. Its growth forecast for China in 2025 remains unchanged, excluding any impact from Beijing's recently announced fiscal stimulus plans.

The IMF predicts no growth this year in Germany, down two-tenths of a percentage point, as the country’s manufacturing sector continues to struggle. The revision cuts the eurozone’s overall growth forecast to 0.8% in 2024 and 1.2% in 2025, although it has been raised by half a percentage point to 2.9% for Spain.

The UK's growth outlook has been raised by four-tenths of a percentage point to 1.1% in 2024, as falling inflation and lower interest rates are expected to stimulate consumer demand. Meanwhile, the growth forecast for Japan has been cut by four-tenths of a percentage point to 0.3%, due to the lingering impact of supply disruptions.

India continues to be a bright spot, with growth expected to be the strongest among major economies, reaching 7.0% in 2024 and 6.5% in 2025, unchanged from the July forecast.

Commercial risks

In assessing the risks, the IMF report pointed to the strong likelihood of increased tariffs and retaliatory measures, but did not specifically mention US Republican presidential candidate Donald Trump's promise to impose a 10% tariff on global imports into the United States and a 60% tariff on goods from China.

Instead, the report presented a representative downside scenario, which included 10% two-way tariffs between the US, the eurozone and China, plus a 10% US tariff on the rest of the world, a decline in migration to the US and Europe, and financial market turmoil that tightened financial conditions. If this happened, the IMF said, it would reduce global GDP by 0.8% in 2025 and 1.3% in 2026.

Other risks outlined in the report include the potential for sharp increases in oil and other commodity prices if conflicts in the Middle East and Ukraine expand.

The IMF also warned countries against pursuing policies that protect domestic industries and workers, as these policies often do not lead to sustainable improvements in living standards.

Source: https://congthuong.vn/du-bao-moi-nhat-cua-imf-hoa-ky-van-la-mot-luc-chinh-cho-tang-truong-global-growth-354325.html