IMF sees stable growth but warns of growing protectionism | Trending Viral hub

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The global economy is nearing a soft landing after several years of geopolitical and economic turmoil, the International Monetary Fund said on Tuesday. But he warned that risks remain, including persistent inflation, the threat of escalating global conflicts and growing protectionism.

In its latest World Economic Outlook report, the IMF projected that global output would remain stable at 3.2 percent in 2024, unchanged from 2023. Although the pace of expansion is tepid by historical standards, the IMF said global economic activity has been surprisingly resilient as central banks aggressively raised interest rates to control inflation and wars in Ukraine and the Middle East further disrupt supply chains.

The forecasts came as policymakers from around the world began arriving in Washington for the spring meetings of the International Monetary Fund and the World Bank. The outlook is brighter than just a year ago, when the IMF warned of underlying “turbulence” and a host of risks.

Although the global economy has proven durable over the past year, defying predictions of a recession, concerns remain that price pressures have not been sufficiently contained and that new trade barriers will be erected amid anxiety over a recent rise in cheap Chinese exports. .

“It is somewhat worrying that progress toward inflation targets has stalled somewhat since the beginning of the year,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in an essay that accompanied the report. “Oil prices have been rising recently in part due to geopolitical tensions and services inflation remains stubbornly high.”

He added: “More trade restrictions on Chinese exports could also push up goods inflation.”

The meeting takes place at a time of growing tension between the United States and China over A surge of Chinese green energy products, such as electric vehicles, lithium batteries and solar panels, that are flooding global markets. Treasury Secretary Janet L. Yellen I returned last week from a trip to China., where he told his counterparts that Beijing’s industrial policy was hurting American workers. He warned that the United States could impose trade restrictions to protect investments in the country’s solar and electric vehicle industries.

The United States and China agreed to hold additional talks on “balanced growth.” On Tuesday afternoon, Yellen will convene a meeting of the US-China Financial Working Group and the Treasury Department’s Economic Working Group.

During her visit to China, Yellen suggested that tariffs on Chinese exports of green energy products were “on the table.” The Biden administration is weighing changes to tariffs that the Trump administration imposed on more than $300 billion worth of Chinese goods. The European Union has been applying its own trade restrictions to China, and fears about China’s growing dominance over clean energy production could lead to a new wave of protectionism globally.

IMF officials have been wary of “fragmentation” in recent years, as economies gravitate toward trading blocs with aligned political interests. Tuesday’s report warned that further restrictions on trade and investment could lead to more inflation and weigh on economies.

“Tariff increases could trigger retaliatory responses, increase costs, and harm both business profitability and consumer well-being,” the report says.

Officials from the Group of 7 and Group of 20 will hold separate discussions on the sidelines of the meetings, which officially begin on Wednesday. Biden administration officials, including Ms. Yellen, are expected to meet with senior Ukrainian officials as they try to build international support for providing more aid to Ukraine.

The meetings take place at a fragile time for the global economy, which has been hit in recent years by a pandemic and war. The world’s top financial officials will discuss ways to maintain economic stability during a year when elections around the world could herald dramatic policy shifts.

The IMF report broadly described its growth prospects for the global economy as “stable but slow,” with much of the resilience being driven by the strength of the United States, where growth is expected to increase from 2.5 percent. percent in 2023 to 2.7 percent in 2024.

Output in the euro zone remains weak, with growth rising from 0.4 percent in 2023 to 0.8 percent this year.

China’s economy is expected to grow at a rate of 4.6 percent in 2024, up from 5.2 percent in 2023. But on Tuesday, China’s statistics agency reported stronger than expected growth in the first quarter, with the economy expanding at an annual rate of 6.6 percent, as the country turned to manufacturing and exports to offset a slowdown in the housing market.

Efforts by central banks to contain price increases by raising interest rates have begun to control inflation. The IMF predicts that global headline inflation will decline from an average annual rate of 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent next year. But the slowdown is not happening at the same pace in all countries and some places are more advanced than others in controlling price increases. The IMF said a scenario in which interest rates must remain high for a longer period of time could place additional stress on housing markets and the financial sector.

The fight against inflation in the United States has begun to stall. While prices are rising more slowly than before, they are still above the 2 percent target of the Federal Reserve. In March, the Consumer Price Index rose 3.8 percent annually after excluding food and fuel prices, raising questions among economists about whether the Federal Reserve will begin cutting interest rates this year.

The most significant threat to the inflation outlook is the possibility that regional conflicts will cause food and energy prices to rise. The IMF said an escalation of the conflict in Gaza, additional attacks on ships in the Red Sea and additional volatility associated with Russia’s war in Ukraine represent wild cards that could disrupt supply chains and derail progress in the global economy.

“Such geopolitical shocks could complicate the current disinflation process and delay the easing of central bank policies, with negative effects on global economic growth,” the IMF said.

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