IMF Chief Warns of Lukewarm Growth, Urges Reforms

The International Monetary Fund (IMF) has released its latest World Economic Outlook, with the IMF chief warning of lukewarm growth in the medium term and urging countries to implement policy reforms. The report highlights the need for structural changes to address persistent frictions and support growth.

The IMF projects global growth to remain steady at 3.2 percent during 2024 and 2025, with advanced economies seeing a slight acceleration and emerging markets experiencing a modest slowdown. However, the forecast for global growth five years from now is at its lowest in decades, indicating a need for policy action.

The IMF chief emphasized the importance of reforms to address structural frictions preventing capital and labor from moving to productive firms. These reforms, such as regulatory reforms, better-targeted public investment, and broader access to financial services, can help unlock growth potential and support long-term economic prospects.

The IMF's inflation forecasts align with its growth projections, with global inflation expected to decline steadily from 6.8 percent in 2023 to 4.5 percent in 2025. However, the IMF warns that underlying (core) inflation is likely to decline more gradually, posing challenges for monetary policy.

To boost medium-term growth prospects, the IMF suggests several policy reforms, including:

* Addressing structural frictions to facilitate the movement of capital and labor to productive firms
* Implementing supply-side reforms to support private sector-led growth
* Enhancing corporate governance and tackling corruption
* Strengthening the rule of law and contract enforcement

The IMF's projections for advanced economies and emerging markets differ, with advanced economies expected to see a slight acceleration in growth and emerging markets experiencing a modest slowdown. The key drivers of this divergence include changes in mortgage and housing markets, persistent structural frictions, and dimmer prospects for growth in large emerging market economies like China.

In conclusion, the IMF's latest World Economic Outlook warns of lukewarm growth in the medium term and urges countries to implement policy reforms to address structural frictions and support long-term economic prospects. The IMF's projections highlight the need for countries to take action to boost growth and mitigate the risks associated with a slowdown in emerging markets.