The International Monetary Fund (IMF) has projected a period of sluggish but stable global economic growth into the next few years. The World Economic Outlook report, released in October, forecasts an annual real GDP growth of 3.2% for both 2024 and 2025, with a slight decline to 3.1% over five years. This performance is considered subpar compared to pre-pandemic averages. Emerging markets and developing economies are anticipated to lead growth at 4.2%, while advanced economies will lag behind at 1.8%. Notable performers include India and China, with expected growth rates of 7.0% and 6.5%, and 4.8% and 4.5% respectively. The report highlights structural challenges such as aging populations and low productivity, along with risks from financial market volatility, geopolitical tensions, and protectionist trade policies. Amid these challenges, the IMF advocates for a policy shift towards fiscal tightening and emphasizes the importance of structural reforms and green transitions.

Economic Performance Across Major Economies

Advanced economies exhibit varying growth trajectories. The US economy is forecasted to grow above average at 2.8% this year and in 2025, driven by robust domestic demand and favorable monetary policies. In contrast, European growth remains tepid, with the eurozone expanding by only 0.4% in the third quarter of 2024. The UK's growth has been modest, with real GDP estimated to have grown by 0.2% in August 2024. Meanwhile, emerging economies show mixed signals. China's third-quarter GDP growth slowed to 4.6%, while India experienced a rare industrial production decline, offset by strong consumer activity. Brazil and Mexico present contrasting scenarios, with Brazil's services sector expanding moderately and Mexico's manufacturing sector facing contraction.

Emerging economies continue to face unique challenges and opportunities. China's stimulus measures aim to combat deflation and meet growth targets, including reducing reserve requirements and mortgage rates. These actions reflect a broader trend of central banks adjusting policies to stabilize economies. The US Federal Reserve and the Bank of England recently cut interest rates, influencing other central banks globally. Russia, however, raised its key rate to 21% due to wartime pressures, reflecting divergent policy responses. Inflation trends vary across regions, with the US experiencing a 2.4% increase in the consumer price index, while the eurozone saw headline inflation drop to 1.7%. Emerging economies like India and Brazil maintain inflation within target ranges, albeit with some fluctuations. Commodity prices remain stable but higher than pre-pandemic levels, with gold continuing its upward trajectory as a safe-haven asset.

Sectoral Trends and Policy Implications

The global manufacturing sector shows signs of recovery, except in the US and eurozone. The eurozone's industrial production index rose 1.8% month-on-month in August, yet remained negative year-over-year. The UK's manufacturing sector recorded solid growth in production volumes, driven by domestic demand. Emerging economies like Brazil saw improvements in manufacturing PMI, while Mexico faced deteriorating conditions. In contrast, the services sector remains robust, with positive PMI readings in the eurozone, UK, and Brazil. Unemployment rates have stabilized in most surveyed economies, with notable decreases in China and Brazil. The US unemployment rate dropped slightly to 4.1%, while China's urban unemployment fell to 5.1%.

Financial markets have shown steady growth, with equity indices rising steadily in September and October. Government bond yields have slightly declined in recent months. Trade dynamics highlight shifts in global supply chains, with total port trade declining in September 2024. The US recorded increased exports and decreased imports, narrowing the trade deficit. The eurozone's trade surplus shrank, influenced by reduced exports to China and increased imports. China's cross-border trade growth accelerated in the third quarter, with export and import growth picking up pace. The IMF underscores the need for policymakers to address structural challenges through reforms and sustainable growth strategies, emphasizing the transition from monetary to fiscal tightening as inflation approaches target levels.