IMF: US economy ‘much better’ than expected

The comment was made by Ms. Kristalina Georgieva, General Director of the International Monetary Fund (IMF) on January 10. In the most recent estimate published in October 2024, the IMF said that the US economy grew at a rate of 2.8% last year and reached 2.2% this year.

The new forecast update was published on January 17, a few days before Mr. Trump took office. According to Ms. Georgieva, the world is watching the specific moves of the President-elect when he returns to the White House.

“It’s not surprising considering the size and role of the US economy. The world is very interested in the policy direction of the upcoming administration, especially on tariffs, corporate taxes, and deregulation. government regulation and performance,” she said.

According to the head of the IMF, inflation in the US is approaching the target of the Federal Reserve (Fed). The labor market continues to stabilize and the Fed may wait for more data before continuing to cut interest rates. Ms Georgieva predicts interest rates will remain “a bit higher for quite some time”.

In a report released by Goldman Sachs Research in November 2024, the bank also predicted that the world’s largest economy would exceed economists’ expectations by 2025. Chief economist David Mericle assessed that fears of a recession had decreased, inflation is trending towards 2% and the labor market is rebalancing.

“The US economy is in good shape,” he said. While the expected policy changes under Mr. Trump could be significant, Mr. Mericle does not think they will greatly change the trajectory of the economy or monetary policy.

Globally, the IMF forecasts that global growth this year will be stable and inflation will continue to decline. However, specific trends vary by region. China – the world’s second largest economy, is witnessing pressure on deflation and domestic demand. Growth will slow somewhat in the European Union and decelerate slightly in India. Brazil faces slightly higher inflation.

A strong USD is likely to lead to higher debt servicing costs than emerging economies and especially low-income countries. Despite reform efforts, low-income countries are in a situation where any new shock will have a “quite negative” impact, according to Ms. Georgieva.

On January 9, the United Nations (UN) report “World Economic Situation and Prospects” forecasts that the global economy will maintain 2.8% in 2025, similar to 2024, which is still slower. The average speed was 3.2% in the pre-epidemic period from 2010 to 2019.

“This poor performance reflects ongoing structural challenges such as weak investment, slow productivity growth, high debt levels and demographic pressures,” the report said.

According to the UN, US GDP growth is expected to decrease from 2.8% last year to 1.9% in 2025. They estimate growth in China to be 4.9% in 2024 and 4.8% this year. Meanwhile, Europe will recover modestly from 0.9% last year to 1.3% in 2025, supported by falling inflation and a recovering labor market.

Major central banks are likely to continue lowering interest rates, as global inflation is expected from 4% in 2024 to 3.4% this year. However, monetary easing alone will not be enough to boost global growth or address growing disparities, according to the UN.