IMF Projects 3.2% Global Economic Growth Next Year... South Korea Up 2.2%

Next Year US Consumption Slows to 2.2%... Europe at 1.2%
"Victory in Inflation War... Downside Risks from Middle East War"

The International Monetary Fund (IMF) has projected that the global economy will grow by 3.2% next year, maintaining a pace similar to this year. South Korea's expected growth rate is forecasted at 2.5% for this year and 2.2% for next year.

On the 22nd (local time), the IMF updated its World Economic Outlook (WEO) and announced these projections.

[Image source=EPA Yonhap News]

The global economic growth rate for this year remains at 3.2%, unchanged from the July forecast.

Overall, the outlook shows little change from the July announcement, but there are some regional adjustments.

The United States' growth rate for this year was revised upward by 0.2 percentage points to 2.8% compared to July. This reflects stronger-than-expected consumption and non-residential investment. The IMF assessed that consumption remained robust due to real wage increases, especially among low-income households.

Next year's growth rate is expected to slow to 2.2% due to reduced fiscal policy and cooling labor markets leading to weaker consumption. However, this is 0.3 percentage points higher than the July forecast.

The Eurozone (20 countries using the euro) is projected to grow by 0.8% this year and 1.2% next year. These figures represent downward revisions of 0.1 and 0.3 percentage points respectively from the July forecast. The IMF expects the Eurozone economy to show better growth next year than this year, driven by domestic demand expansion, increased consumption from real wage growth, and investment stimulation due to easing of austerity policies.

Japan's growth rate for this year was lowered by 0.4 percentage points from July and 0.6 percentage points from April to 0.3%. This reflects temporary supply disruptions caused by production halts at major automobile factories and the disappearance of the tourism boom effect that had boosted economic activity last year. However, next year, growth is expected to reach 1.1%, supported by expanded private consumption due to real wage increases. This is 0.1 percentage points higher than the July forecast.

South Korea's economy is expected to grow by 2.5% this year and 2.2% next year, unchanged from the July forecast.

Emerging and developing economies are projected to grow by 4.2% this year and next, similar to the July forecast.

China's growth rate for this year was lowered by 0.2 percentage points to 4.8% compared to July, while next year's growth remains unchanged at 4.5%. Although China recorded a 5.2% growth rate in 2023, factors such as a slump in the real estate market and declining consumer confidence have slowed growth.

India recorded an 8.2% growth rate in 2023 but is expected to slow to 7.0% this year and 6.5% next year. The IMF attributes this to the unwinding of pent-up demand accumulated during the COVID-19 pandemic.

For emerging and developing economies, the outlook for the Middle East, Central Asia, and Sub-Saharan Africa was downgraded due to disruptions in production and transportation of crude oil and other raw materials, conflicts, civil unrest, and extreme weather events.

Emerging economies in Asia have benefited from a surge in demand for semiconductors and electronic products, driven by large-scale artificial intelligence (AI) investments.

Global inflation is projected to decrease from an average of 6.7% in 2023 to 5.8% in 2024 and 4.3% in 2025. The IMF stated, "Although price pressures persist in some countries, the global fight against inflation has largely been won."

The IMF assessed that downside risks to the global economy have become more pronounced compared to July. Pierre-Olivier Gourinchas, IMF Chief Economist, said, "Despite good news on inflation, downside risks are increasing, and downside risks now dominate the economic outlook."

The IMF pointed out that regional conflicts, including the escalation of the Middle East war, pose significant risks to commodity markets. It also warned that maintaining tight monetary policy for too long could suddenly worsen financial conditions. Regarding the recent trend toward increased protectionism, the IMF noted that while it may yield short-term benefits such as increased investment, it could provoke retaliatory measures from trading partners and fail to ensure sustained improvements in living standards.