IMF upgrades global economic outlook
Yahoo Finance Live anchors discuss news that the IMF has upgraded its outlook.
BRAD SMITH: But getting to our first thing that you need to know more about this morning. The global economy is showing signs of resilience but is expected to slow further, according to the International Monetary Fund, known in your hood as the IMF. Latest global economic outlook is where they publish much of their research and the outlook. And on a positive note, the IMF upgraded its forecast for world growth to 2.9% from its prior prediction of 2.7%, and sees it expanding in 2024.
The only major economy predicted to shrink this year is the UK. We heard from IMF chief economist Pierre-Olivier Gourinchas. Here's what he had to say.
PIERRE-OLIVIER GOURINCHAS: Whether you're looking at European economies, you're looking at the US, you're looking at other parts of the world, you see labor markets that have been quite resilient. You see household consumption that's been stronger than expected business investment. And so you put all of this together and you have a slightly more resilient global economy.
BRAD SMITH: He also published in a blog that China and India are expected to account for half of the global growth this year. Noteworthy, given some of the stimulus mechanisms that China is also gonna be putting in place, as well. But that has much larger ranging implifications-- implications, rather, for growth globally, as well, this year.
JULIE HYMAN: Yeah, and it should be noted that the US is not the strongest part of this outlook, of course. That the US growth is projected to fall from 2% in 2022 to 1.4% in 2023 and then 1% in 2024. So the global, overall, is expected to reaccelerate in 2024 but not yet the US. So that's kind of an interesting note.
Another interesting one is all of the risks that the IMF is still flagging, despite things being less worse than initially forecast. They talked about some of the potential things that could go wrong, including the recovery in China stalling out, the war in Ukraine escalating, and sovereign debt spreads kind of expanding here, which would also be-- cause some problems, particularly in emerging markets.
BRIAN SOZZI: Yeah I appreciate the-- I'll just add here quickly. I appreciate the upgrades here from the IMF. But I think the headline right on the top of this report I'm looking at it, really says a lot. "Inflation peaking amid low growth." Inflation peaking, it doesn't suggest that inflation has-- you know, is gonna come down aggressively as the year progresses. Low growth, does that mean, we are in a recession? Does that mean-- does that justify what we've seen in the market this month? Unclear.
And then we might see from the IMF-- I'm joking a little bit-- a couple of months from now, inflation peaking amid low growth equals rate cuts. I think that's the next missing piece of this puzzle and, ultimately, why we've seen this big rally in stocks here. I think investors are very positioned-- they've gone beyond the pivot here, guys. I think they're just looking for flat out rate cuts in the back half of this year.
BRAD SMITH: Yeah, the IMF really telling many of the central banks to keep their foot on the gas in that instance, as well here.
JULIE HYMAN: Yeah, I was just gonna say, you know, one question that we haven't dug into as much is, will the Federal Reserve and other central banks be satisfied with inflation being at a persistently high level if it stops going up? I mean, it seems to have stopped going up, right? It seems to be decelerating a little bit. Well, what if it only decelerates to 5%?
BRIAN SOZZI: Well, then they stay on the gas with rate hikes.
JULIE HYMAN: Well, but do they or don't they, right? So it's-- I think we're gonna have to see over time. The other side of the equation, maybe at some point, will become more important. That is the job market, as well, which is the other part of the Fed's dual mandate. But we'll see.