The International Monetary Fund (IMF) projected that India and China would contribute half of the global growth this year, compared to just a tenth for the United States and eurozone combined.
China’s economy is projected to grow from 3.2 percent in 2022 to 5.2 percent this year. But the growth may be shortlived, as the IMF predicts that China’s economy will decline to 4.5 percent in 2024.
According to IMF projections, the U.S. economy will grow 1.4 percent this year, lower than the previous projection of 2.0 percent, while growth in the euro-area is expected to bottom out at 0.7 percent in 2023.
Global growth is projected to fall to 2.9 percent this year, then rebound to 3.1 percent in 2024. The IMF said that global inflation will decline by 6.6 percent this year, though it’s still above pre-pandemic levels.
“Global inflation is expected to decline this year, but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80 percent of countries,” Gourinchas said.
The five major countries in the Association of Southeast Asian Nations (ASEAN)—Indonesia, Malaysia, Philippines, Singapore, and Thailand—will grow by 4.3 percent this year. Japan’s economy will increase by 1.8 percent, with continued monetary and fiscal policy support.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said.
“Elsewhere, China’s sudden reopening paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate.”
UK’s Economy to Shrink
The IMF said that economic growth in the United Kingdom would likely contract by 0.6 percent this year, making it the only advanced economy expected to experience a year of economic contraction.“With inflation at about 10 percent or above in several euro-area countries and the United Kingdom, household budgets remain stretched,” the IMF said.
“The accelerated pace of rate increases by the Bank of England and the European Central Bank is tightening financial conditions and cooling demand in the housing sector and beyond,” it stated.
In a speech at Bloomberg’s London headquarters on Jan. 27, Hunt said that reducing inflation was the “only sustainable way to restore industrial harmony” in Britain as he suggested tax cuts would have to wait.
“My party understands better than others the importance of low taxes in creating incentives and fostering the animal spirits that spur economic growth,” he said.
“Another Conservative insight is that risk-taking by individuals and businesses can only happen when governments provide economic and financial stability. So the best tax cut right now is a cut in inflation.”
Talking to the BBC after the speech, the chancellor said that it is “unlikely” that there will be room for any “significant” tax cuts in the next budget, which is to be unveiled in March.
