Under the effect of multiple crises, the decline is inexorably confirmed for the global economy and gaps are widening between countries. After 3.5% in 2022, the International Monetary Fund (IMF) is counting on GDP growth of 3% this year and 2.9% in 2024, according to its new projections, published Tuesday, during the general meetings being held this year. year in Marrakech. Africa had not hosted them for 50 years: it was in Nairobi in 1973, recalled the Director General, Kristalina Georgieva, emphasizing that the problems were very similar to those of today. Reference to the challenges of debt and poverty. Despite the terrible earthquake that hit the country last month, the Moroccan authorities who had already had to postpone it due to Covid chose to maintain the event which attracts a lot of activity in the tourist city.
Monday, for the first opening day, activity was in full swing under the canopy and the mobile structures designed for these general assemblies, on the same site used for COP 22, halfway between the airport, the new town and the medina. Members of official delegations, representatives of multilateral institutions, diverse and varied players in the world of finance…. more than 10,000 people come together to discuss debt, poverty, climate, international solidarity… and cultivate the address book. “I come here mainly to do business,” admits an investor in a Saudi fund.
During the press conference on these new forecasts on Tuesday morning, the question was asked about the possible economic repercussions of the war situation in Israel triggered by Hamas. Economic advisor Pierre-Olivier Gourinchas was very cautious. “It is still too early to make assessments of the impact in the region and beyond.” The IMF is also closely monitoring the evolution of oil prices, which have increased by 4% in two days. “An increase of 10% leads to a drop of 0.15 points in growth and an increase of 0.4% in inflation,” he said.
If global growth slows, the situation could have been worse, however, recognizes the IMF. Economies have shown resilience after the shocks of the pandemic, the war in Ukraine and the cost of living crisis. “In retrospect, the resistance was remarkable,” comments Pierre-Olivier Gourinchas, the economic advisor, in a blog. Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-long high inflation, economic activity has slowed, but not stopped.”
The recession, which threatened in the United States, did not materialize. On the contrary, the growth forecast has been revised upwards compared to April: the multilateral institution expects 2.1% for this year, compared to 1.7% last April. The gap is widening significantly with the euro zone – with a small 0.7% – weighed down by the poor performance of Germany, the only one among the major economies to experience a recession. The former European locomotive is suffering from lower demand from its trading partners, led by China, and from the weakness of sectors sensitive to high interest rates.
Regarding France, the IMF forecasts growth of 1.3% next year (after 1% in 2023), very slightly below the “voluntarist” objective according to Bruno Le Maire’s term of 1. 4% included in the draft budget. The IMF forecast is in line with that of the European Commission (1.2%) and more optimistic than that of the Banque de France (0.9%).
The United States even exceeded its pre-pandemic level this year. They are an exception, compared to other developed countries and even more so to emerging and developing economies, severely weakened by the pandemic and then by the surge in energy and food prices. The engine across the Atlantic is fueled by investment and the consumption appetite of Americans. There are three reasons for this, the IMF puts forward: “they received significant transfers at the start of the pandemic and spent more quickly; they were better protected from rising energy prices resulting from the war in Ukraine; and they felt relatively confident in a historically tight U.S. labor market, which supported real disposable incomes.”
In the United States, points out the Washington institution, inflationary pressures more reflect these labor market tensions while in Europe, the main lever comes from the rise in energy prices. That said, monetary tightening is starting to bear fruit: from 9.2% in 2022, price increases decrease to 5.9% this year. And the IMF forecasts 4.8% in 2024.
Growth divergences are also felt in emerging countries. The IMF confirms the slowdown in China with growth expected for this year at 5% and 4.2% in 2024. A scenario again revised downwards compared to April. “China must face growing headwinds due to the real estate crisis and weakening confidence,” says Pierre-Olivier Gourinchas.
Some countries, on the other hand, are doing well. This is the case of India (6.3% growth), supported by dynamic consumption in the second quarter. In Latin America, Mexico – which has seen its forecast raised to 3.2% for this year – is benefiting from renewed activity in construction and services, thanks to tourism, and from the resilience of its big neighbor, the Uncle Sam. The revision is also spectacular for Brazil (3.1% instead of 0.9% anticipated in April) thanks to agriculture, a key export sector, particularly dynamic and also the good performance of the consumption, supported by fiscal stimulus measures.
These forecasts should be taken with caution in a climate of great uncertainty in the face of numerous risks and geopolitical upheavals. Especially since they were put to press before the Hamas attack on Israel. If the “extreme” risks are less marked than in the spring, notes the IMF, referring to the psychodrama over the American debt ceiling and the tensions on the banking sector, “the trend is still oriented downwards”. Monetary fund experts list no less than four.
The first linked to China, in the event of a worsening of the real estate crisis, constitutes a “significant risk for the global economy”. The second concerns commodity prices which could become more volatile due to renewed geopolitical tensions and disruptions linked to climate change. Since June, oil prices have increased by around 25% and food prices are at a high level, which could get worse if it worsens in Ukraine. Thirdly, inflation, which still remains too high, especially expectations which could require more energetic action from central banks. And finally the budgetary risk in the face of soaring debt and financing costs. Which requires fine management on the monetary and budgetary front. “The margin for error is small on the political level,” warns the IMF.