IMF cuts SA's economic growth outlook to 0.9%

The Monetary Fund's Chief Economist Pierre-Olivier Gourinchas released the World Economic Outlook on Tuesday.

Projections for 2025 have also been reduced by 0.1 of a percentage point to 1.2%.

Gourinchas said the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose.

However, more work needs to be done in developing countries.

"Amid high government debt in many economies, a disruptive turn to tax hikes and spending cuts could weaken activity, erode confidence, and sap support for reform and spending to reduce risks from climate change," Gourinchas said. 

"Geoeconomic fragmentation could intensify, with higher barriers to the flow of goods, capital, and people implying a supply-side slowdown.

"On the upside, looser fiscal policy than necessary and assumed in projections could raise economic activity in the short term, although risking more costly policy adjustment later on. Inflation could fall faster than expected amid further gains in labor force participation, allowing central banks to bring easing plans forward. Artificial intelligence and stronger structural reforms than anticipated could spur productivity.

"As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation touches down smoothly, by neither easing policies prematurely nor delaying too long," added Gourinchas.

While the emerging markets and developing economies have been projected to slow down, Gourinchas said the baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025.

"A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025.

"The forecast for global growth five years from now at 3.1 percent—is at its lowest in decades," he said.

The global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025.

Gourinchas said the global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability.

"Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose.

"The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia’s war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening.

"Global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent."

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