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Updated Tuesday, January 30, 2024-14:20

The world economy will grow more than expected in 2024 after the improvement of the United States and surprises such as Russia, but the great exception is the Eurozone. The International Monetary Fund (IMF) revises upwards its growth forecast for the world economy to reach 3.1% and lowers that of the euro countries to an average of 0.9%. That of Spain, cuts it to 1.5% for this year.

The IMF published this Tuesday its so-called

World Economic Outlook Update

and starts like this:

"Projections place global growth at 3.1% in 2024 and 3.2% in 2025

, which means that the forecasts for 2024 are 0.2 percentage points higher than the October 2023 edition, due to stronger-than-expected resilience in the United States and several major emerging market and developing economies,

as well as fiscal stimulus in China "

. And he points out as good international news that "

inflation is declining more rapidly than expected in most regions,

while supply-side problems dissipate and a restrictive monetary policy is applied. It is expected that the general level of global inflation will decline to 5.8% in 2024 and 4.4% in 2025, which represents a downward revision of the forecast for 2025."

IMF Projections

The European problem is that "the greatest dynamism was not felt everywhere:

in the euro area, growth was quite moderate due to weak consumer confidence

, the persistent effects of high energy prices and the weakness of business investment and the manufacturing sector, given their sensitivity to interest rates. Consequently,

it cuts its forecast for Germany by four tenths, so its Gross Domestic Product will grow by just 0.5% this year

. It is three tenths lower than that of France, which will grow by 1%, and

two tenths lower than that of Spain, which, nevertheless, its GDP will increase more than the other three large economies

at the aforementioned rate of 1.5%.

In the Spanish case, the IMF cuts two tenths with respect to its October forecast and is far from the Government's official estimate of 2% for the year as a whole

. The IMF thus joins the twenty research services that do not believe for now that it will reach 2%, although the Minister of Economy,

Carlos Body

, has ratified that official forecast this Tuesday after the National Institute of Statistics assured that the economy grew 2.5% in 2023.

With Italy, the IMF does not foresee changes with respect to its October forecast and predicts growth of just 0.7%.

The big surprise is Russia

, which, despite the theoretical sanctions and the wear and tear of the Ukraine war, is experiencing an upward revision of no less than 1.5 points and predicts that its GDP will grow by 2.6% this year. "It is the reflection of the carryover effect of stronger than expected growth in 2023, generated by the increase in military spending and private consumption, and the support of wage growth in a stressed labor market," says the IMF about the case. Russian.

In the region called Latin America and the Caribbean, the downward revision is four tenths and the new forecast: an average growth of 1.9% in 2024

. "The revision of the forecast for 2024 is due to Argentina's negative growth in the context of a significant adjustment of economic policy to restore macroeconomic stability. As in other major economies in the region, improvements of 0.2 percentage points are recorded for Brazil and 0.6 percentage points for Mexico, mainly due to the knock-on effects of stronger than expected domestic demand and higher than expected growth in the main trading partners."

The overall vision of the IMF and its chief economist

Pierre-Olivier Gourinchas

rules out "a hard landing" in 2024.

In 2025 it even foresees that the improvement will extend to the Eurozone, where it foresees an average growth of 1.7%, already close to the 1.8% from the US. From Spain it expects 2.1% - the same as last October - again above France (1.7%), Germany (1.6%) and Italy (1.1%).

At the same time, the IMF points out that its general improvement in forecast is modest, because the forecasts for 2024 and 2025 (3.1% and 3.2% growth respectively)

"are lower than the historical average of 3.8% (2000-19 )

, given the high interest rates of monetary policy to combat inflation, the withdrawal of fiscal support in an environment of high debt that slows down economic activity and the low growth of underlying productivity.

As positive points to support this growth in the short term, he points out "

a more rapid disinflation could lead to a greater relaxation of financial conditions

. A fiscal policy that is more lax than necessary and than assumed in the projections could lead to a temporary increase in the growth, under penalty of a more costly subsequent adjustment. And he advises "greater dynamism of structural reforms could boost productivity and lead to positive cross-border spillovers."

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However, it also indicates downward risks to its own forecasts:

"The new escalations in raw material prices due to geopolitical shocks - such as the continuous attacks in the Red Sea - and supply disruptions

, or Greater persistence of core inflation could prolong tight monetary conditions. A deepening of China's real estate problems or the destabilization caused elsewhere by tax increases and spending cuts could also cause growth disappointment. ".

The latter is what he identifies as the risk of "destabilization caused by fiscal consolidation." His diagnosis is that

"in many economies, it is necessary to make fiscal adjustments to address the increase in debt ratios.

However, an excessively abrupt shift towards Tax hikes and spending cuts, beyond what was forecast, could translate into slower-than-expected growth in the short term." And, in a warning to sailors, he emphasizes: "

Adverse market reactions could put pressure on some countries that lack a viable

medium-term consolidation plan and face risks of over-indebtedness, to apply drastic adjustments."

Regarding this last section, it shows concern for the most indebted countries. The managing director of the IMF,

Kristalina Georgieva

, already declared last November to EL MUNDO that "Spain, France and Italy have to fasten their belts and make adjustments." In its January report, the IMF warns: "Governments of major economies could withdraw fiscal policy stimulus during 2024-25 more slowly than necessary and assumed, resulting in higher global growth than projected in However, in some cases, these delays could exacerbate inflation

and, given the high level of public debt, lead to an increase in borrowing costs and a more drastic adjustment of economic policy

, which would have a negative impact in global growth later.