Global Growth Prospects Face Uncertain Future Amid Elevated Policy Risks
Karachi: The International Monetary Fund (IMF) has announced its mid-year forecast for global economic growth, projecting a modest expansion of 3.3 percent in both 2025 and 2026. This marks a slight decline from the historical average of 3.7 percent between 2000 and 2019.
According to the IMF's October 2024 World Economic Outlook (WEO), the US is expected to lead the recovery, with growth forecasts unchanged from previous estimates, driven by an upward revision in the country's economic prospects. However, other major economies are expected to experience downward revisions, bringing global growth prospects downward.
Global inflation rates are also projected to decline, falling to 4.2 percent in 2025 and 3.5 percent in 2026. This convergence of inflation rates back towards target could be seen as a positive development for economic stability.
Despite overall cautious optimism, IMF warns that medium-term risks remain tilted downwards due to elevated policy uncertainty. On the one hand, upside risks could boost growth in robust economies like the US; however, risks in other countries are expected to worsen, casting doubt on diversification and investment.
Moreover, the ongoing disinflation process faces disruptions from government policies aimed at maintaining fiscal stability. The IMF stresses the need for policymakers to strike a balance between inflation control and real economic activity expansion, as well as build buffers against potential setbacks.
To mitigate these risks, governments are encouraged to adopt structural reforms and strengthened international cooperation. With heightened uncertainty looming over global growth prospects, policymakers must adopt proactive measures to boost medium-term growth through sound policy decisions, ensuring the long-term stability of economies worldwide.
As the World Economic Forum continues to evolve in response to changing economic landscapes, markets remain closely watching the IMF's forecasts for its insights into emerging trends and key drivers shaping the future trajectory of global economies.