WORLD
ECONOMIC
OUTLOOK
2024
OCT
INTERNATIONAL MONETARY FUND
Policy Pivot, Rising Threats
WORLD
ECONOMIC
OUTLOOK
2024
OCT
Policy Pivot, Rising Threats
INTERNATIONAL MONETARY FUND
©2024 International Monetary Fund
Cover and Design: IMF CSF Creative Solutions Division
Composition: Absolute Service, Inc.
Cataloging-in-Publication Data
IMF Library
Names: International Monetary Fund.
Title: World economic outlook (International Monetary Fund)
Other titles: WEO | Occasional paper (International Monetary Fund) | World economic and
financial surveys.
Description: Washington, DC : International Monetary Fund, 1980- | Semiannual | Some
issues also have thematic titles. | Began with issue for May 1980. | 1981-1984: Occasional
paper / International Monetary Fund, 0251-6365 | 1986-: World economic and financial
surveys, 0256-6877.
Identifiers: ISSN 0256-6877 (print) | ISSN 1564-5215 (online)
Subjects: LCSH: Economic development—Periodicals. | International economic relations—
Periodicals. | Debts, External—Periodicals. | Balance of payments—Periodicals. |
International finance—Periodicals. | Economic forecasting—Periodicals.
Classification: LCC
ISBN 979-8-40028-115-0 (English Paper)
979-8-40028-317-8 (English ePub)
979-8-40028-313-0 (English Web PDF)
Disclaimer: The World Economic Outlook (WEO) is a survey by the IMF staff pub-
lished twice a year, in the spring and fall. The WEO is prepared by the IMF staff and
has benefited from comments and suggestions by Executive Directors following their
discussion of the report on October 8, 2024. The views expressed in this publication
are those of the IMF staff and do not necessarily represent the views of the IMF’s
Executive Directors or their national authorities.
Recommended citation: International Monetary Fund. 2024. World Economic Outlook:
Policy Pivot, Rising Threats. Washington, DC. October.
Publication orders may be placed online, by fax, or through the mail:
International Monetary Fund, Publication Services
. Box 92780, Washington, DC 20090, USA
Tel.: (202) 623-7430 Fax: (202) 623-7201
E-mail: publications@
mailto:publications@
International Monetary Fund | October 2024 iii
Assumptions and Conventions vii
Further Information ix
Data x
Preface xi
Foreword xii
Executive Summary xiv
Chapter 1. Global Prospects and Policies 1
Uncertainty Seeping through as Policies Shift 1
The Outlook: Stable yet Underwhelming—Brace for Uncertain Times 6
Risks to the Outlook: Tilted to the Downside 15
Policy Priorities: From Restoring Price Stability to Rebuilding Buffers 18
Box . The Global Automotive Industry and the Shift to Electric Vehicles 22
Box . Risk Assessment Surrounding the World Economic Outlook’s Baseline Projections 24
Commodity Special Feature: Market Developments and the Inflationary Effects of
Metal Supply Shocks 28
References 39
Chapter 2. The Great Tightening: Insights from the Recent Inflation Episode 41
Introduction 41
What Happened? Dissecting Inflation Dynamics 43
The Monetary Policy Reaction 48
Lessons for Monetary Policy: A Model-Based Analysis 51
Summary and Policy Implications 55
Box . The Role of Central Bank Balance Sheet Policies 58
Box . The Role of Price-Suppressing Policies 60
References 62
Chapter 3. Understanding the Social Acceptability of Structural Reforms 65
Introduction 65
Social Acceptability of Reforms: A Primer 68
The Challenge of Implementing Structural Reforms: Key Facts 68
Attitudes toward Reforms: Evidence from Surveys 71
Tools and Strategies for Sustainably Advancing Reform Agendas: Lessons from
11 Country Cases 76
Conclusions and Policy Implications 78
Box . Policies to Facilitate the Integration of Ukrainian Refugees into the
European Labor Market: Early Evidence 80
References 81
CONTENTS
WORLD ECONOMIC OUTLOOK: POLIC y PIvOT, RIsINg ThRE aTs
iv International Monetary Fund | October 2024
Statistical Appendix 85
Assumptions 85
What’s New 85
Data and Conventions 86
Country Notes 87
Classification of Economies 89
General Features and Composition of Groups in the World Economic Outlook
Classification 89
Table A. Classification by World Economic Outlook Groups and Their Shares in
Aggregate GDP, Exports of Goods and Services, and Population, 2023 91
Table B. Advanced Economies by Subgroup 92
Table C. European Union 92
Table D. Emerging Market and Developing Economies by Region and Main Source
of Export Earnings 93
Table E. Emerging Market and Developing Economies by Region, Net External Position,
Heavily Indebted Poor Countries, and Per Capita Income Classification 94
Table F. Economies with Exceptional Reporting Periods 96
Table G. Key Data Documentation 97
Box A1. Economic Policy Assumptions underlying the Projections for Selected Economies 107
Box A2. Revised World Economic Outlook Purchasing-Power-Parity Weights 111
List of Tables 114
Output (Tables A1–A4) 115
Inflation (Tables A5–A7) 122
Financial Policies (Table A8) 127
Foreign Trade (Table A9) 128
Current Account Transactions (Tables A10–A12) 130
Balance of Payments and External Financing (Table A13) 137
Flow of Funds (Table A14) 141
Medium-Term Baseline Scenario (Table A15) 144
World Economic Outlook Selected Topics 145
IMF Executive Board Discussion of the Outlook, October 2024 155
Tables
Table . Overview of the World Economic Outlook Projections 10
Table . Overview of the World Economic Outlook Projections at
Market Exchange Rate Weights 12
Annex Table . European Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 33
Annex Table . Asian and Pacific Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 34
Annex Table . Western Hemisphere Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 35
Annex Table . Middle East and Central Asia Economies: Real GDP,
Consumer Prices, Current Account Balance, and Unemployment 36
Annex Table . Sub-Saharan African Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 37
Annex Table . Summary of World Real per Capita Output 38
Table . Hypotheses to Boost Policy Support 73
Table . Historical Employment Protection Legislation Reform Episodes 76
CONTENTs
vInternational Monetary Fund | October 2024
CONTENTs
Table . Changes in World GDP Shares from Purchasing-Power-Parity Revisions 112
Table . Revisions to Real GDP Growth of World Economic Outlook Aggregates 113
Online Tables—Statistical Appendix
Table B1. Advanced Economies: Unemployment, Employment, and Real GDP per Capita
Table B2. Emerging Market and Developing Economies: Real GDP
Table B3. Advanced Economies: Hourly Earnings, Productivity, and Unit Labor
Costs in Manufacturing
Table B4. Emerging Market and Developing Economies: Consumer Prices
Table B5. Summary of Fiscal and Financial Indicators
Table B6. Advanced Economies: General and Central Government Net Lending/Borrowing
and General Government Net Lending/Borrowing Excluding Social Security Schemes
Table B7. Advanced Economies: General Government Structural Balances
Table B8. Emerging Market and Developing Economies: General Government
Net Lending/Borrowing and Overall Fiscal Balance
Table B9. Emerging Market and Developing Economies: General Government
Net Lending/Borrowing
Table B10. Selected Advanced Economies: Exchange Rates
Table B11. Emerging Market and Developing Economies: Broad Money Aggregates
Table B12. Advanced Economies: Export Volumes, Import Volumes, and Terms of
Trade in Goods and Services
Table B13. Emerging Market and Developing Economies by Region: Total Trade in Goods
Table B14. Emerging Market and Developing Economies by Source of
Export Earnings: Total Trade in Goods
Table B15. Summary of Current Account Transactions
Table B16. Emerging Market and Developing Economies: Summary of
External Debt and Debt Service
Table B17. Emerging Market and Developing Economies by Region:
External Debt by Maturity
Table B18. Emerging Market and Developing Economies by Analytical Criteria:
External Debt by Maturity
Table B19. Emerging Market and Developing Economies: Ratio of External Debt to GDP
Table B20. Emerging Market and Developing Economies: Debt-Service Ratios
Table B21. Emerging Market and Developing Economies, Medium-Term
Baseline Scenario: Selected Economic Indicators
Figures
Figure . Growth and Inflation Revisions 2
Figure . Inflation Surprises and Importance of Food in CPI 2
Figure . Recent Inflation Developments 3
Figure . Labor Market Developments 3
Figure . Monetary Transmission 4
Figure . Fiscal Policy Stance 5
Figure . Pressure on Emerging Markets 6
Figure . Globalization and Trade Fragmentation 6
Figure . Trade Fragmentation: Cold War and Now 7
Figure . Continued Rotation to Services 7
Figure . Global Assumptions 8
Figure . Growth Outlook 9
Figure . Inflation Outlook 14
Figure . Medium-Term Outlook 14
WORLD ECONOMIC OUTLOOK: POLIC y PIvOT, RIsINg ThRE aTs
vi International Monetary Fund | October 2024
Figure . Current Account and International Investment Positions 15
Figure . Inflation Surprises and Changes in Inflation Expectations 16
Figure . Social Unrest Levels 17
Figure . Required Fiscal Consolidation 19
Figure . Government Spending Composition and Future Income Growth 20
Figure . Productivity and Global Value Chains in the Automotive Sector 22
Figure . Global Share of Electric Vehicles 23
Figure . Forecast Uncertainty around Global Growth and Inflation Projections 24
Figure . Impact of Scenario A on GDP and Headline Inflation 26
Figure . Impact of Scenario B on GDP and Headline Inflation 27
Figure . Commodity Market Developments 28
Figure . Consumption of Copper and Oil 30
Figure . Intermediate Input Expenditure Share of Metals and Oil in
Gross Output in the United States 30
Figure . Countries’ Input-Output Network Exposure to Metals and Oils 31
Figure . Impulse Responses 32
Figure . Cross-Country Inflation Dynamics 42
Figure . Movements in Sectoral Price Dispersion 43
Figure . Sectoral Characteristics and Inflation Dynamics 44
Figure . Energy Price Pass-Through into CPI Inflation 45
Figure . Sectoral Inflation and Price Flexibility 45
Figure . Evolution of Phillips Curves 46
Figure . Inflation Drivers in the United States, Other Advanced Economies, and
Emerging Markets 47
Figure . Monetary Policy Tightening 48
Figure . Comparison of Inflation Episodes 49
Figure . Monetary Policy Transmission to CPI during Tightening Episodes 50
Figure . Phillips Curve under Different Constraints 51
Figure . Impacts of Supply Constraints and Commodity Sector Shocks 52
Figure . Counterfactual Monetary Policy 54
Figure . Role of Coordinated Monetary Policy 54
Figure . Alternative Policy Rules 55
Figure . Central Bank Balance Sheets 58
Figure . Estimated Impact of Monetary Policy and LSAP Tightening 59
Figure . Discretionary Inflation Stabilization Policies during the Pandemic 60
Figure . Euro Area Actual and Counterfactual Energy Price Levels 60
Figure . Structural Reforms: Uneven Convergence amid Public Resistance 66
Figure . Reform Episodes by Implementation Outcome 69
Figure . Strategies for Building Consensus for Reform 70
Figure . Relative Importance of Reform Strategies for Predicting Reform Implementation 71
Figure . Drivers of Reform Support 72
Figure . Effect of Information Strategies on Reform Support 74
Figure . Reasons for Nonsupport and the Role of Compensatory and
Complementary Measures 75
International Monetary Fund | October 2024 vii
A number of assumptions have been adopted for the projections presented in the World Economic Outlook
(WEO). It has been assumed that real effective exchange rates remained constant at their average levels during July
30, 2024–August 27, 2024, except for those for the currencies participating in the European exchange rate mech-
anism II, which are assumed to have remained constant in nominal terms relative to the euro; that established
policies of national authorities will be maintained (for specific assumptions about fiscal and monetary policies for
selected economies, see Box A1 in the Statistical Appendix); that the average price of oil will be $ a barrel in
2024 and $ a barrel in 2025; that the three-month government bond yield for the United States will average
percent in 2024 and percent in 2025, that for the euro area will average percent in 2024 and per-
cent in 2025, and that for Japan will average percent in 2024 and percent in 2025; and that the 10-year
government bond yield for the United States will average percent in 2024 and percent in 2025, that for the
euro area will average percent in 2024 and percent in 2025, and that for Japan will average percent in
2024 and percent in 2025. These are, of course, working hypotheses rather than forecasts, and the uncertain-
ties surrounding them add to the margin of error that would, in any event, be involved in the projections. The
estimates and projections are based on statistical information available through October 7, 2024, but may not
reflect the latest published data in all cases. For the date of the last data update for each economy, please refer to
the notes provided in the online WEO database.
The following conventions are used throughout the WEO:
• . . . to indicate that data are not available or not applicable;
• – between years or months (for example, 2023–24 or January–June) to indicate the years or months covered,
including the beginning and ending years or months; and
• / between years or months (for example, 2023/24) to indicate a fiscal or financial year.
• “Billion” means a thousand million; “trillion” means a thousand billion.
• “Basis points” refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of
1 percentage point).
• Data refer to calendar years, except in the case of a few countries that use fiscal years. Please refer to Table F in
the Statistical Appendix, which lists the economies with exceptional reporting periods for national accounts and
government finance data.
• For some countries, the figures for 2023 and earlier are based on estimates rather than actual outturns. Please
refer to Table G in the Statistical Appendix, which lists the latest actual outturns for the indicators in the
national accounts, prices, government finance, and balance of payments for each country.
What is new in this publication:
• Following the recent release of the 2021 survey by the World Bank Group’s International Comparison Pro-
gram for new purchasing-power-parity benchmarks, the WEO’s estimates of purchasing-power-parity weights
and GDP valued at purchasing power parity have been updated. For more details, see Box A2 in the Statistical
Appendix.
• For Bangladesh, fiscal year estimates of real GDP and purchasing-power-parity GDP are now used in country
group aggregates.
• For Zimbabwe, the authorities have recently redenominated their national accounts statistics following the
introduction on April 5, 2024 of a new national currency, the Zimbabwe gold, replacing the Zimbabwe
dollar. The use of the Zimbabwe dollar ceased on April 30, 2024.
ASSUMPTIONS AND CONVENTIONS
WORLD ECONOMIC OUTLOOK: POLIC y PIvOT, RIsINg ThRE aTs
viii International Monetary Fund | October 2024
In the tables and figures, the following conventions apply:
• Tables and figures in this report that list their source as “IMF staff calculations” or “IMF staff estimates” draw
on data from the WEO database.
• When countries are not listed alphabetically, they are ordered on the basis of economic size.
• Minor discrepancies between sums of constituent figures and totals shown reflect rounding.
• Composite data are provided for various groups of countries organized according to economic characteristics or
region. Unless noted otherwise, country group composites represent calculations based on 90 percent or more of
the weighted group data.
• The boundaries, colors, denominations, and any other information shown on maps do not imply, on the part of
the IMF, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.
As used in this report, the terms “country” and “economy” do not in all cases refer to a territorial entity that is
a state as understood by international law and practice. As used here, the term also covers some territorial entities
that are not states but for which statistical data are maintained on a separate and independent basis.
International Monetary Fund | October 2024 ix
Corrections and Revisions
The data and analysis appearing in the World Economic Outlook (WEO) are compiled by the IMF staff at the
time of publication. Every effort is made to ensure their timeliness, accuracy, and completeness. When errors are
discovered, corrections and revisions are incorporated into the digital editions available from the IMF website and
on the IMF eLibrary (see below). All substantive changes are listed in the online table of contents.
Print and Digital Editions
Print
Print copies of this WEO can be ordered from the IMF bookstore at
Digital
Multiple digital editions of the WEO, including ePub, enhanced PDF, and HTML, are available on the
IMF eLibrary at
Download a free PDF of the report and data sets for each of the charts therein from the IMF website at
or scan the QR code below to access the WEO web page directly:
Copyright and Reuse
Information on the terms and conditions for reusing the contents of this publication are at
.
FURTHER INFORMATION
International Monetary Fund | October 2024x
This version of the World Economic Outlook (WEO) is available in full through the IMF eLibrary (.
) and the IMF website (). Accompanying the publication on the IMF website is a larger com-
pilation of data from the WEO database than is included in the report itself, including files containing the series
most frequently requested by readers. These files may be downloaded for use in a variety of software packages.
The data appearing in the WEO are compiled by the IMF staff at the time of the WEO exercises. The histor-
ical data and projections are based on the information gathered by the IMF country desk officers in the context
of their missions to IMF member countries and through their ongoing analysis of the evolving situation in each
country. Historical data are updated on a continual basis as more information becomes available, and structural
breaks in data are often adjusted to produce smooth series with the use of splicing and other techniques. IMF
staff estimates continue to serve as proxies for historical series when complete information is unavailable. As a
result, WEO data can differ from those in other sources with official data, including the IMF’s International
Financial Statistics.
The WEO data and metadata provided are “as is” and “as available,” and every effort is made to ensure their
timeliness, accuracy, and completeness, but these cannot be guaranteed. When errors are discovered, there is a
concerted effort to correct them as appropriate and feasible. Corrections and revisions made after publication are
incorporated into the electronic editions available from the IMF eLibrary () and on the IMF
website (). All substantive changes are listed in detail in the online tables of contents.
For details on the terms and conditions for usage of the WEO database, please refer to the IMF Copyright and
Usage website (
Inquiries about the content of the WEO and the WEO database should be sent by mail or online forum
(telephone inquiries cannot be accepted):
World Economic Studies Division
Research Department
International Monetary Fund
700 19th Street, NW
Washington, DC 20431, USA
Online Forum:
DATA
International Monetary Fund | October 2024 xi
The analysis and projections contained in the World Economic Outlook are integral elements of the IMF’s
surveillance of economic developments and policies in its member countries, of developments in international
financial markets, and of the global economic system. The survey of prospects and policies is the product of a
comprehensive interdepartmental review of world economic developments, which draws primarily on information
the IMF staff gathers through its consultations with member countries. These consultations are carried out
in particular by the IMF’s area departments—namely, the African Department, Asia and Pacific Department,
European Department, Middle East and Central Asia Department, and Western Hemisphere Department—
together with the Strategy, Policy, and Review Department; the Monetary and Capital Markets Department; and
the Fiscal Affairs Department.
The analysis in this report was coordinated in the Research Department under the general direction of
Pierre-Olivier Gourinchas, Economic Counsellor and Director of Research. The project was directed by Petya
Koeva Brooks, Deputy Director, Research Department, and Jean Marc Natal, Deputy Division Chief, Research
Department.
The primary contributors to this report are Silvia Albrizio, Jorge Alvarez, Hippolyte Balima, Emine Boz,
Damien Capelle, Pragyan Deb, Bertrand Gruss, Eric Huang, Thomas Kroen, Toh Kuan, Colombe Ladreit, Alberto
Musso, Diaa Noureldin, Galip Kemal Ozhan, Nicholas Sander, Yu Shi, Sebastian Wende, and Sihwan Yang.
Other contributors include Maryam Abdou, Hites Ahir, Gavin Asdorian, Tohid Atashbar, Jared Bebee, Christian
Bogmans, Benjamin Carton, Francesca Caselli, Yaniv Cohen, Allan Dizioli, Wenchuan Dong, Angela Espiritu,
Rebecca Eyassu, Pedro de Barros Gagliardi, Ganchimeg Ganpurev, Ziyan Han, Alexander Kia Howe, Chris
Jackson, Gene Kindberg-Hanlon, Eduard Laurito, Jungjin Lee, Weili Lin, Barry Liu, Jorge Miranda-Pinto, Joseph
Moussa, Dirk Muir, Cynthia Nyanchama Nyakeri, Emory Oakes, Pablo Vega Olivares, Maximiliano Jerez Osses,
Andrea Pescatori, Clarita Phillips, Naissa Pierre, Rafael Portillo, Shrihari Ramachandra, Nirav Shedge, Arash
Sheikholeslam, Martin Stuermer, Nicholas Tong, Roc Walker, Xueliang Wang, Isaac Warren, Evgenia Weaver,
Philippe Wingender, Yarou Xu, Max Yarmolinsky, Jiaqi Zhao, Canran Zheng, Dian Zhi, and Liangliang Zhu.
Gemma Rose Diaz from the Communications Department led the editorial team for the report, with
production and editorial support from Michael Harrup and additional assistance from Lucy Scott Morales,
James Unwin, Grauel Group, and Absolute Service, Inc. Elad Meshulam, Mishri Someshwar, and John Michael
Burkhardt from IMF Creative Lab assisted with the design of the surveys used in Chapter 3. Gabriele Ciminelli,
Davide Furceri, Daisuke Fukuzawa, Ergys Islamaj, and Duong Trung Le provided updated estimates of selected
IMF Structural Reform Database series used in Chapter 3. Tatiana Goriainova and Sylvie Poirot from CSF Library
provided data licensing services and support.
The analysis has benefited from comments and suggestions by staff members from other IMF departments, as
well as by Executive Directors following their discussion of the report on October 8, 2024. However, estimates,
projections, and policy considerations are those of the IMF staff and should not be attributed to Executive
Directors or to their national authorities.
PREFACE
International Monetary Fund | October 2024xii
The Global Battle against Inflation Is
Almost Won; A Policy Triple Pivot Is
Now Needed
The global battle against inflation has largely been
won, even though price pressures persist in some
countries. After peaking at percent year over year
in the third quarter of 2022, headline inflation rates
are now projected to reach percent by the end of
2025, below the average level of percent between
2000 and 2019.
Moreover, despite a sharp and synchronized tight-
ening of monetary policy around the world, the global
economy has remained unusually resilient throughout
the disinflationary process, avoiding a global recession.
Growth is projected to hold steady at percent in
2024 and 2025, even though a few countries, espe-
cially low-income developing countries, have seen
sizable downside growth revisions, often as a result of
increased conflicts.
While the global decline in inflation is a major mile-
stone, downside risks are rising and now dominate the
outlook: an escalation in regional conflicts, monetary
policy remaining tight for too long, a possible resur-
gence of financial market volatility with adverse effects
on sovereign debt markets (see October 2024 Global
Financial Stability Report), a deeper growth slowdown
in China, and the continued ratcheting up of protec-
tionist policies.
What accounts for the decline in inflation? As
Chapter 2 of this report argues, the surge and sub-
sequent decline in global inflation reflects a unique
combination of shocks: broad supply disruptions
coupled with strong demand pressures in the wake of
the pandemic, followed by sharp spikes in commodity
prices caused by the war in Ukraine. These shocks led
to an upward shift and a steepening of the relationship
between activity and inflation, the Phillips curve. As
supply disruptions eased and monetary policy tight-
ening started to constrain demand, normalization in
labor markets allowed inflation to decline rapidly with-
out a major slowdown in activity. Clearly, much of the
disinflation can be attributed to the unwinding of the
shocks themselves, followed by improvements in labor
supply, often linked to immigration. But monetary
policy played an important role too by helping to keep
inflation expectations anchored, avoiding deleterious
wage-price spirals and a repeat of the disastrous infla-
tion experience of the 1970s.
The return of inflation to near central bank targets
paves the way for a much-needed policy triple pivot.
The first—on monetary policy—has started. Since
June, major central banks in advanced economies have
started to cut their policy rates, moving their policy
stance toward neutral. This will support activity at a
time when many advanced economies’ labor markets
are showing signs of weakness, with rising unemploy-
ment rates. It will also help ward off the downside
risks.
The change in global monetary conditions is easing
the pressure on emerging market economies, with their
currencies strengthening against the US dollar and
financial conditions improving. This will help reduce
imported inflation pressures, allowing these countries
to pursue more easily their own disinflation path.
However, vigilance remains key. Inflation in services
remains too elevated, almost twice as high as before
the pandemic. Some emerging market economies are
facing a resurgence of inflationary pressures, some-
times because of elevated food prices. Furthermore,
we have now entered a world dominated by supply
disruptions—from climate, health, and geopolitics.
It is always harder for monetary policy to maintain
price stability when faced with such shocks, which
simultaneously increase prices and reduce output.
Finally, while inflation expectations have remained well
anchored this time around, it may be harder next time,
as workers and firms will be more vigilant in protect-
ing their standards of living and profits going forward.
The second pivot is on fiscal policy. Fiscal space
is also a cornerstone of financial stability. After years
of loose fiscal policy, it is now time to stabilize debt
dynamics and rebuild much-needed fiscal buffers.
While the decline in policy rates provides some fiscal
relief by lowering funding costs, this will not be
FOREWORD
FOREWORD
xiiiInternational Monetary Fund | October 2024
sufficient, especially as long-term real interest rates
are much above prepandemic levels. In many coun-
tries, primary balances, the difference between fiscal
revenues and public expenditures net of debt service,
need to improve. For some countries, like the United
States and China, debt dynamics are not stabilized
under current fiscal plans (see October 2024 Fiscal
Monitor). In many others, while early fiscal plans
showed promise after the pandemic and cost-of-living
crises, there are increasing signs of slippage. The path
is narrow: unduly delaying adjustment increases the
risk of disorderly market-imposed adjustments, while
an excessively sharp turn toward fiscal consolidation
would be self-defeating and hurt economic activity.
Success requires staying the course by implementing
gradual and credible multiyear adjustments without
delay, where consolidation is necessary. The more
credible and disciplined the fiscal adjustment, the more
monetary policy will be able to play a supporting role.
But the willingness and ability to deliver disciplined
and credible adjustments have been lacking.
The third pivot—and the hardest—is on structural
reforms. Much more needs to be done to improve
growth prospects and lift productivity, as this is the
only way we can address the many challenges we
face: rebuilding fiscal buffers, aging and declining
populations in many parts of the world, young and
growing populations in Africa in search of opportunity,
tackling the climate transition, increasing resilience,
and improving the lives of the most vulnerable, within
and across countries. Unfortunately, medium-term
global growth remains lackluster, at percent. While
much of this reflects China’s weaker outlook, medi-
um-term prospects in other regions, such as Latin
America and the European Union, have also deterio-
rated. The recently published Draghi report offers a
clear-eyed assessment of the diminished prospects in
the region—and the associated challenges.
Faced with increased external competition and struc-
tural weaknesses in manufacturing and productivity,
many countries are implementing industrial and trade
policy measures to protect their workers and industries.
While these measures can sometimes boost investment
and activity in the short run—especially when they
rely on debt-financed subsidies—they often lead to
retaliation, are unlikely to deliver sustained improve-
ments in standards of living at home or abroad, and
should be firmly resisted when they do not carefully
address well-identified market failures or national secu-
rity concerns. Instead, economic growth must come
from ambitious domestic reforms that boost technol-
ogy and innovation, improve competition and resource
allocation, further economic integration, and stimulate
productive private investment.
Yet while structural reforms are as urgent as ever,
they often face significant social resistance. Chapter 3
of this report explores the factors that shape the social
acceptability of reforms, one of the prerequisites for
their eventual success. A clear message emerges from
the chapter: better communication can only go so far.
Instead, building trust between the government and
its people—a two-way process throughout the policy
design—and the inclusion of proper compensatory
measures to mitigate distributional effects are essential
features. This is an important lesson that should also
resonate when thinking about ways to further improve
international cooperation and bolster our multilateral
efforts to address common challenges as we celebrate the
80th anniversary of the Bretton Woods institutions.
Pierre-Olivier Gourinchas
Economic Counsellor
International Monetary Fund | October 2024xiv
Global growth is expected to remain stable yet
underwhelming. At percent in 2024 and 2025,
the growth projection is virtually unchanged from
those in both the July 2024 World Economic Outlook
Update and the April 2024 World Economic Outlook.
However, notable revisions have taken place beneath
the surface, with upgrades to the forecast for the
United States offsetting downgrades to those for
other advanced economies—in particular, the largest
European countries. Likewise, in emerging market and
developing economies, disruptions to production and
shipping of commodities—especially oil—conflicts,
civil unrest, and extreme weather events have led to
downward revisions to the outlook for the Middle
East and Central Asia and that for sub-Saharan Africa.
These have been compensated for by upgrades to the
forecast for emerging Asia, where surging demand for
semiconductors and electronics, driven by significant
investments in artificial intelligence, has bolstered
growth. The latest forecast for global growth five
years from now––at percent—remains mediocre
compared with the prepandemic average. Persistent
structural headwinds—such as population aging and
weak productivity—are holding back potential growth
in many economies.
Cyclical imbalances have eased since the beginning
of the year, leading to a better alignment of economic
activity with potential output in major economies.
This adjustment is bringing inflation rates across coun-
tries closer together and on balance has contributed
to lower global inflation. Global headline inflation is
expected to fall from an annual average of percent
in 2023 to percent in 2024 and percent in
2025, with advanced economies returning to their
inflation targets sooner than emerging market and
developing economies. As global disinflation continues
to progress, broadly in line with the baseline, bumps
on the road to price stability are still possible. Goods
prices have stabilized, but services price inflation
remains elevated in many regions, pointing to the
importance of understanding sectoral dynamics and of
calibrating monetary policy accordingly, as discussed in
Chapter 2.
Risks to the global outlook are tilted to the down-
side amid elevated policy uncertainty. Sudden erup-
tions in financial market volatility—as experienced
in early August—could tighten financial conditions
and weigh on investment and growth, especially in
developing economies in which large near-term exter-
nal financing needs may trigger capital outflows and
debt distress. Further disruptions to the disinflation
process, potentially triggered by new spikes in com-
modity prices amid persistent geopolitical tensions,
could prevent central banks from easing monetary
policy, which would pose significant challenges
to fiscal policy and financial stability. Deeper- or
longer-than-expected contraction in China’s property
sector, especially if it leads to financial instability,
could weaken consumer sentiment and generate neg-
ative global spillovers given China’s large footprint in
global trade. An intensification of protectionist pol-
icies would exacerbate trade tensions, reduce market
efficiency, and further disrupt supply chains. Rising
social tensions could prompt social unrest, hurting
consumer and investor confidence and potentially
delaying the passage and implementation of necessary
structural reforms.
As cyclical imbalances in the global economy
wane, near-term policy priorities should be carefully
calibrated to ensure a smooth landing. In many
countries, shifting gears on fiscal policy is urgently
needed to ensure that public debt is on a sustain-
able path and to rebuild fiscal buffers; the pace of
adjustment should be tailored to country-specific
circumstances. Structural reforms are necessary to lift
medium-term growth prospects, but support for the
most vulnerable should be maintained. Chapter 3
discusses strategies to enhance the social acceptability
of these reforms—a crucial prerequisite for successful
implementation. Multilateral cooperation is needed
more than ever to accelerate the green transition and
to support debt-restructuring efforts. Mitigating the
risks of geoeconomic fragmentation and strengthen-
ing rules-based multilateral frameworks are essential
to ensure that all economies can reap the benefits of
future growth.
EXECUTIVE SUMMARY
International Monetary Fund | October 2024 1
Uncertainty Seeping through as
Policies Shift
The past four years have put the resilience of the
global economy to the test. A once-in-a-century pan-
demic, eruption of geopolitical conflicts, and extreme
weather events have disrupted supply chains, caused
energy and food crises, and prompted governments
to take unprecedented actions to protect lives and
livelihoods. The global economy has demonstrated
resilience overall, but this masks uneven performance
across regions and lingering fragilities.
The negative supply shocks to the global econ-
omy since 2020 have had lasting effects on output
and inflation, with varied impacts across individual
countries and country groups. The sharpest contrasts
are between advanced and developing economies.
Whereas the former have caught up with activity and
inflation projected before the pandemic, the latter are
showing more permanent scars (see the October 2023
World Economic Outlook), with large output short-
falls and persistent inflation (Figure ). They also
remain more vulnerable to the types of commodity
price surges that followed Russia’s invasion of Ukraine
(Figure ; October 2023 and April 2024 World
Economic Outlook).
Since the beginning of the year, signs have emerged
that cyclical imbalances are being gradually resorbed,
with economic activity in major economies better
aligned with their potential. These developments
may have helped bring inflation rates across countries
closer together, but the momentum in global disinfla-
tion appears to have slowed in the first half of the year
(July 2024 World Economic Outlook Update). Goods
prices have stabilized, and some are declining, but
services price inflation remains high in many coun-
tries, partly reflecting rapid wage increases, as pay is
still catching up with the inflation surge of 2021–22.
This has forced some central banks to delay their pol-
icy-easing plans (Chapter 2), putting public finances
under more pressure, especially in countries where
debt-servicing costs are already high and refinancing
needs significant.
Now, as before, the global outlook will be shaped
largely by fiscal and monetary choices, their interna-
tional spillovers, the intensity of geoeconomic frag-
mentation forces, and the ability of governments to
implement long-overdue structural reforms. With infla-
tion approaching central bank targets and governments
striving to manage debt dynamics, the policy mix is
expected to shift from monetary to fiscal tightening
as monetary policy rates are brought down, closer to
their natural levels. How fast such rotations occur in
individual countries will have consequences for capital
flows and exchange rates.
The level of uncertainty surrounding the outlook
is high. Newly elected governments (about half of the
world population has gone or will go to the polls in
2024) could introduce significant shifts in trade and
fiscal policy (Box ). Moreover, the return of finan-
cial market volatility over the summer has stirred old
fears about hidden vulnerabilities. This has heightened
anxiety over the appropriate monetary policy stance—
especially in countries where inflation is persistent and
signs of slowdown are emerging. Further intensification
of geopolitical rifts could weigh on trade, investment,
and the free flow of ideas. This could affect long-term
growth, threaten the resilience of supply chains, and cre-
ate difficult trade-offs for central banks. On the upside,
governments could succeed in building the necessary
consensus around overdue and difficult-to-pass struc-
tural reforms (Chapter 3), which would boost growth
and enhance fiscal sustainability and financial stability.
Steady Disinflation, yet Bumps in the
Road Still Possible
In many advanced economies, disinflation has come
at a relatively low cost to employment, thanks partly
to offsetting supply developments. These included
a faster-than-expected decline in energy prices and
a surprising rebound in labor supply, bolstered
by substantial immigration flows that helped cool
labor markets (April 2024 World Economic Outlook).
Moreover, temporary sectoral bottlenecks during
CH
AP
TE
R
CH
AP
TE
R
GLOBAL PROSPECTS AND POLICIES1
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
2 International Monetary Fund | October 2024
and after the pandemic led to a steepening of the
Phillips curve and implied a small sacrifice ratio (the
slack required to decrease inflation). As explained in
Chapter 2, a temporarily steeper Philips curve helps
explain both the rapid surge in inflation and the—
so far—relatively painless disinflation (Figure ,
panel 1).
Since the beginning of 2024, signs that cyclical
imbalances are being gradually resorbed have helped
bring inflation rates across countries closer together
(Figure , panel 2). Disinflation has continued
broadly as expected but did show signs of slowing in
the first half of the year, suggesting potential bumps on
the road to price stability (July 2024 World Economic
Outlook Update). The persistence in core inflation
has been driven primarily by services price inflation.
At percent, core services price inflation is about
50 percent higher than before the pandemic in major
advanced and emerging market economies (excluding
the US). This contrasts with core goods price inflation,
which has declined all the way to zero (Figure ,
panel 3). Recent increases in shipping rates, especially
for routes to and from China, have put upward pres-
sure on goods prices. However, this source of upward
pressure has been mitigated so far by declining prices
for exports from China (Figure , panel 4).
Stubbornness in services price inflation partly
reflects higher nominal wage growth relative to
prepandemic trends. Even as labor market pressure has
started to ease (Figure , panel 2), wage negotiators
have continued to aim for sizable raises to counter the
cost-of-living squeeze felt after the 2021–22 inflation
surge (Figure , panel 1). That nominal wage growth
continues to run higher after the inflation surge is
consistent with past inflationary episodes—when real
wages catch up to their equilibrium level determined
by labor productivity—and does not necessarily risk a
wage-price spiral (see Chapter 2 of the October 2022
World Economic Outlook).
With output gaps expected to close, and assuming
no disruptions to labor supply in advanced economies,
wage growth is expected to moderate. Whether recent
increases translate into further persistence in core infla-
tion will depend on (1) the impact of recent real wage
increases on unit labor costs, which itself depends on
labor productivity, and (2) the willingness of firms to
absorb increased unit labor costs in their profit margins.
These two factors seem to be working differently in
the largest two advanced economies but should still
allow disinflation to continue. In the United States,
wage growth has reflected productivity gains lately,
keeping unit labor costs contained. In the euro area,
recent wage increases have exceeded productivity,
raising unit labor costs (Figure , panel 3). However,
European firms should be able to absorb those costs,
given large increases in profit shares in recent years
(Figure , panel 4).
AEs
EMMIEs
LIDCs
Figure . Growth and Inflation Revisions
(Percentage points, relative to January 2020 WEO Update)
−5
20
0
5
10
15
In
�a
tio
n
ra
te
Cumulative GDP growth
Source: IMF staff calculations.
Note: X-axis reports latest estimates for cumulative GDP growth from 2020 to 2024
in deviation from January 2020 WEO Update forecast. Y-axis reports latest estimates
for inflation rate in 2024 in deviation from January 2020 WEO Update forecast. AEs =
advanced economies; EMMIEs = emerging market and middle-income economies;
LIDCs = low-income developing countries; WEO = World Economic Outlook.
−40 −30 −20 −10 0 20 3010 40
AEs
EMMIEs
LIDCs
Figure . Inflation Surprises and Importance of Food in CPI
(Percent)
−20
100
0
20
40
60
80
Av
er
ag
e a
nn
ua
l C
PI
in
�a
tio
n,
20
20
–2
4
(d
ev
iat
ion
fr
om
Ja
n.
20
20
W
EO
U
pd
ate
)
0 20 40 60 80
Food and non-alcoholic beverages’ weight in CPI
Source: IMF staff calculations.
Note: The solid line denotes linear regression. AEs = advanced economies; CPI =
consumer price index; EMMIEs = emerging market and middle-income economies;
LIDCs = low-income developing countries; WEO = World Economic Outlook.
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
3International Monetary Fund | October 2024
Core goods
Core services, excluding US
US core services
Composite
Los Angeles to Shanghai
Rotterdam to New York
Rotterdam to Shanghai
Shanghai to New York
Shanghai to Rotterdam
China export prices (right scale)
Figure . Recent In�ation Developments
1. Sacrifice Ratio for Inflation
(Change in output gap for
a change in inflation)
19
90
:Q
4–
94
:Q
1
20
00
:Q
1–
02
:Q
2
08
:Q
3–
09
:Q
3
22
:Q
4–
24
:Q
1
2. Headline Inflation Distribution
(Percent, year over year)
2019:Q1
24:Q2
20:Q1
21:Q1
22:Q1
23:Q1
−10 −5 0 5 10 15 20 25 30
3. Sticky Inflation Driven by Services
(Percent, three month over three month, annualized)
2
10
0
2
4
6
8
2015–19 averages
Jan.
19
Jan.
20
Jan.
21
Jan.
22
Jan.
23
Jan.
24
Aug.
24
Jan.
2018
4. Rising Shipping Costs
(US$ per 40 ft. container; index, 2010 = 100, right scale)
0
20,000
5,000
10,000
15,000
100
180
120
140
160
15 17 19 21 23 242013
Sources: Haver Analytics; Organisation for Economic Co-operation and Development;
and IMF staff calculations.
Note: In panel 1, sample includes 37 advanced economies. Panel 2 shows the density
distribution of headline inflation developments across 32 advanced economies and
13 emerging market and developing economies. The vertical line indicates the 2019:Q1
median. In panel 3, the two aggregates are the purchasing-power-parity-weighted
averages. Sample includes 11 advanced economies and 9 emerging market and
developing economies that account for approximately 55 percent of 2021 world output
at purchasing-power-parity weights.
EA union wage
US ECI
Posted wage (major AEs)
2019:Q4
Peak
Latest
Japan
United Kingdom
Euro area
United States
Labor share
Profit share
Other input share
Figure . Labor Market Developments
1. Wage Growth
(Percent, year over year)
0
6
1
2
3
4
5
2019:Q1 20:Q1 21:Q1 22:Q1 23:Q1 24:
Q2
2. Vacancy to Unemployment
(Ratio)
JPN USA GBR DEU EA CAN AUS KOR FRA
3. Unit Labor Costs
(Percent, year over year)
−20
30
−10
0
10
20
2017:Q1 18:Q1 19:Q1 20:Q1 21:Q1 22:Q1 23:Q1 24:
Q2
4. Inflation and Profit Shares
(Percent, annualized)
US 2022
2010–19
2020–21
2023–24:Q1
Eu
ro
ar
ea
2022
2010–19
2020–21
2023–24:Q1
−1 0 1 2 3 4 5 6 7 8
Sources: Eurostat; Haver Analytics; US Bureau of Economic Analysis; and IMF staff
calculations.
Note: In panel 4, US decomposition uses data on factor shares from the nonfinancial
corporate sector only. Euro area decomposition is based on whole-economy data. Data
labels in the figure use International Organization for Standardization (ISO) country
codes. AEs = advanced economies; EA = euro area; ECI = Employment Cost Index.
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
4 International Monetary Fund | October 2024
Policy Mix: Tight Monetary, Loose Fiscal Policies
Economic developments over the past four years
have had a lot to do with how individual countries
have deployed fiscal and monetary policies since the
pandemic.
Following an initial period of easing, monetary policy
has tightened significantly, with central banks in many
emerging markets starting earlier than major central
banks in advanced economies (Chapter 2). Most central
banks stopped increasing nominal policy rates in the
first half of 2023. But real rates continued to rise as
inflation expectations started to decline (Figure ,
panel 1), tightening the monetary policy stance further.
Real policy rates are currently above estimates of the
natural rates and thus are acting to cool down economic
activity and bring inflation back to target.
Higher policy rates have led to higher mortgage and
bank lending rates, a sign that the first leg of monetary
transmission has worked as expected. The pass-through
to market rates has been gradual but seems to have fin-
ished. The increase in borrowing costs has in turn held
back private credit growth and investment, moderating
aggregate demand (Figure , panels 2 and 3).
The contrast with fiscal policy is striking. Despite
a strong rebound in activity in 2022 and generalized
inflationary pressures, fiscal policy has remained looser.
Some slippage with respect to consolidation plans is
evident (see the October 2024 Fiscal Monitor), except in
low-income developing countries, where limited fiscal
space has constrained their ability to tackle energy and
food crises (Figure , panel 1). From 2022 to 2024,
monetary policy tightened significantly in most coun-
tries, but fiscal policy lagged and even eased in many
instances (Figure , panel 2), complicating the task
of central banks in their effort to rein in inflation and
delaying the necessary rebuilding of fiscal buffers. Tight
monetary policy combined with relatively loose fiscal
policy, particularly relevant in the United States, may be
one of the key factors that has led to dollar appreciation
in 2024.
This is expected to change. With public-debt-servic-
ing costs on an upward trend in emerging market and
developing economies and a recent jump in the United
States (Figure , panel 3), the baseline assumes a
rotation of the policy mix. Necessary fiscal consoli-
dation in many economies is expected to slow down
growth and calls for looser monetary policy, which
should in turn help governments trim deficits more
easily (see “Policy Priorities: From Restoring Price
Stability to Rebuilding Buffers”).
United States
Euro area
China
Other AEs
Other EMDEs
Policy rate
Cash deposit rate
Mortgage rate
Euro area: Change in credit to residents
US: Change in credit from all commercial banks
Figure . Monetary Transmission
1. Real Policy Rate Paths in Major Economies
(Percent)
−6
6
−4
−2
0
2
4
Jan.
2020
Jan.
21
Jan.
22
Jan.
23
Jan.
24
Jan.
25
Jan.
26
Dec.
26
2. Median Bank Lending and Deposit Rates across Advanced Economies
(Percent)
0
1
2
3
4
5
6
7
8
Jan.
2019
Jan.
20
Jan.
21
Jan.
22
Jan.
23
Jan.
24
Jul.
24
3. Real Credit Growth
(Percent change, month over month)
−
−
Jun.
2021
Jun.
22
Jun.
23
Jun.
24
Projections
Sources: Bank for International Settlements; Consensus Economics; European Central
Bank; Federal Reserve Board; Haver Analytics; and IMF staff calculations.
Note: In panel 1, the gray area denotes discretionary tightening periods (nominal rate
hikes, excluding China), and the blue area denotes nondiscretionary tightening periods
(nominal rate pauses, excluding China). Sample includes 16 AEs and 65 EMDEs. “Other”
aggregates are medians. Real rates are calculated by subtracting 12-month-ahead
inflation expectations, computed based on Consensus Forecast surveys of professional
forecasters, from nominal policy rates. The 12-month-ahead inflation expectations are
constructed as the weighted sum of forecasts for the current and subsequent calendar
years (see Buono and Formai 2018). Projections for United States and euro area real
rates are based on market-implied policy rates and inflation swaps for expected
inflation. Panel 2 includes Australia, Canada, Japan, New Zealand, the United Kingdom,
and the United States. In panel 3, credit growth is deflated by GDP deflator. AEs =
advanced economies; EMDEs = emerging market and developing economies.
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
5International Monetary Fund | October 2024
Returning Financial Market Volatility
In the first week of August, global financial mar-
kets experienced significant turbulence, interrupt-
ing a steady and rapid ascent of equity markets.
Weaker-than-expected jobs data raised concerns about
a potential recession in the United States, leading to
a stock market correction. This, combined with the
Bank of Japan’s decision to hike interest rates, resulted
in a rapid unwinding of Japanese-yen-funded carry
trades, which amplified the equity market correction
(see Box of the October 2024 Global Financial
Stability Report and Box of the April 2023 Global
Financial Stability Report).
Markets have rapidly stabilized. The Chicago Board
Options Exchange Volatility (VIX) Index, after having
surged to its highest point since 2020, has returned to its
historical average. However, vulnerabilities that contrib-
uted to the recent increase in market volatility persist.
These include the disconnect between economic uncer-
tainty and market volatility (see Chapter 1 of the October
2024 Global Financial Stability Report) and overstretched
equity valuations, particularly in the technology sector.
Revised market expectations regarding US mone-
tary policy have aligned the outlook for rate cuts there
more closely with those for other advanced economies,
halting the appreciation of the US dollar against the
currencies of major advanced economies. However,
depreciation pressures remain high in emerging market
and developing economies (Figure , panel 1). Many
of these economies, which began hiking interest rates
earlier, have also started easing earlier, leading to a nar-
rowing of differentials between their policy rates and
that of the United States.
For some emerging market and developing econ-
omies faced with large short-term external financing
needs—often a significant share of their buffer of net
international reserves—sovereign borrowing spreads
have increased since April, posing an additional
challenge (Figure , panel 2). Although few of these
economies are in debt distress—defined as having
spreads greater than 1,000 basis points—heavy reliance
on short-term external financing reveals vulnerabilities
to sudden currency swings.
Rising Geopolitical Tensions but Limited Impact
on Global Trade So Far
Despite ongoing geopolitical tensions, global trade
volume as a share of world GDP has not deterio-
rated. However, signs of geoeconomic fragmentation
Projected consolidation
Actual consolidation
AEs excluding US
EMMIEs
LIDCs
US
CHN
USA
IND
RUS
JPN
DEU
BRA
IDN
FRA GBR ITA
MEX
KOR
CAN
AUSZAF
1. Fiscal Slippage
(Percentage points; 2024 minus 2022 primary balance)
Source: IMF staff calculations.
Note: In panel 1, the projected and actual consolidations are from January 2022
WEO Update and October 2024 WEO, respectively; the panel uses the primary
balance to broaden the country coverage. In panel 2, the primary balance refers to
the general government structural primary balance in percent of potential GDP, and
G20 economies are presented, except for Argentina, Saudi Arabia, and Türkiye, owing
to lack of data availability. In panel 3, the projections are based on the October 2024
WEO. Data labels in the figure use International Organization for Standardization
(ISO) country codes. AEs = advanced economies; EMMIEs = emerging market and
middle-income economies; LIDCs = low-income developing countries; WEO = World
Economic Outlook.
Figure . Fiscal Policy Stance
2. Monetary-Fiscal Policy Mix
(Percentage points)
3. General Government Interest Payments
(Percent of general government revenues)
−3
3
−2
−1
0
1
2
−4
16
0
4
8
12
0
20
4
8
12
16
Change in structural primary balance, 2022−24
La
te
st
re
al
po
lic
y r
at
es
World AEs
excluding
euro area
Euro
area
EMMIEs China LIDCs
2008 10 12 14 16 18 20 22 24 26 29
−4 −2 0 2 4 6 8 10 12 14
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
6 International Monetary Fund | October 2024
have started to emerge, with increasingly more trade
occurring within geopolitical blocs rather than between
them (Figure ). Specifically, when the averages for
the periods 2017 to 2022 and 2022 to the first quarter
of 2024 are compared, goods trade growth is observed
to have declined by approximately 2½ percentage
points more between geopolitically distant blocs than
within blocs.
A more fragmented global trade landscape could
emerge if geopolitical tensions continue to develop in a
way similar to that during the Cold War (Figure ).
Although fragmentation, if it goes hand in hand with
an increase in intrabloc trade, may not necessarily
imply rapid deglobalization (Gopinath and others
2024), it could reduce the resilience of global supply
chains, increase funding costs, disrupt cross-border
capital flows (see Chapter 3 of the April 2023 Global
Financial Stability Report) and lower market efficiency,
slow the transfer of knowledge between advanced and
emerging market and developing economies (hamper-
ing income convergence), increase costs and risks for
businesses, and induce a larger economic cost for the
green transition (Box ).
The Outlook: Stable yet
Underwhelming—Brace for
Uncertain Times
There has been little change in the global growth
outlook since the April 2024 World Economic Outlook.
Following the postpandemic rebound, the global
projection for GDP growth has been hovering at about
3 percent, both in the short and the medium term.
Weak growth extends beyond the disinflation period,
suggesting that potential growth has been durably
affected (see Chapter 3 of the April 2024 World Eco-
nomic Outlook).
Jan. 2–Apr. 16 Apr. 16 to date Cumulative
TUR
ARG
BOL
SLVEGYCMR
GHA
KENMOZ
TUN
BLR
GEO
Figure . Pressure on Emerging Markets
1. Exchange Rate Depreciation versus US Dollar
(Percent appreciation from January to September 20, 2024)
−80
20
−70
−60
−50
−40
−30
−20
−10
0
10
2. Short-Term External Financing Needs and Sovereign Spreads
(Basis points)
−500
4,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Sources: Haver Analytics; and IMF staff calculations.
Note: In panel 1, percentage appreciation is computed as the difference in log
exchange rates. In panel 2, fitted regression line is y = − + , with a slope
t-statistic equal to . The regression is weighted by purchasing-power-parity GDP.
The sample excludes EMDE oil exporters. Data labels in the figure use International
Organization for Standardization (ISO) country codes. EMDE = emerging market and
developing economy.
M
YS ZA
F
PO
L
ID
N
RO
U
DZ
A
CH
N
PH
L
IN
D
HU
N
PE
R
CH
L
CO
L
BR
A
M
EX TU
R
EG
Y
NG
A
ET
H
So
ve
re
ig
n
sp
re
ad
s
Short-term external ¦nancing needs, 2025
(percent of net international reserves)
0 50 100 150 200 250 300 350 400
Goods trade
Total trade
Figure . Globalization and Trade Fragmentation
1. Global Trade Development and Outlook
(Percent of GDP)
20
70
30
40
50
60
2. Changes in Goods Trade Growth
(Percentage points; difference in trade growth before and after war)
−6
2
−5
−4
−3
−2
−1
0
1
Sources: Gopinath and others 2024; and IMF staff calculations.
Note: In panel 1, “trade” is defined as the sum of exports and imports. Global trade
and GDP for percentage calculation are in current US dollars. Dashed portions of
graph lines indicate October 2024 World Economic Outlook forecasts. In panel 2,
change is calculated as the average trade growth during 2022:Q2–24:Q1 minus the
average trade growth during 2017:Q1–22:Q1 within and between blocs. For the
current period, bloc definition is based on a hypothetical Western bloc centered on
the US and Europe and a hypothetical Eastern bloc centered on China and Russia.
Bilateral quarterly growth rates are computed as the differences in log bilateral
trade, which are then aggregated using bilateral nominal trade as weights.
1980 85 90 95 2000 05 10 15 20 25 29
Global
�nancial
crisis
Between blocs Within blocs
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
7International Monetary Fund | October 2024
The picture is far from monolithic, however, and
important sectoral and regional shifts underpin the
stable global outlook that has emerged since the
April 2024 World Economic Outlook. Relative to
prepandemic trends, goods prices remain elevated
compared with those for services, a lingering effect
of the pandemic and its aftermath, which saw strong
demand for goods alongside supply constraints
(Figure , panel 1). Consequently, behind stable
growth figures, a global shift from goods to ser-
vices consumption is underway. This rebalancing
is tending to boost activity in the services sector in
advanced and emerging markets but is dampening
manufacturing. Manufacturing production is also
increasingly shifting toward emerging market econ-
omies—in particular, China and India—as advanced
economies lose competitiveness (Figure ,
panel 2).
Global Assumptions
Before regional developments are discussed, it is
important to review the key assumptions about com-
modity prices and fiscal and monetary policy on which
the baseline projection is predicated.
With acknowledgment of exceptional policy uncer-
tainty associated with newly elected governments in
2024 (in 64 countries representing about half of the
global population), the baseline projection is flanked
with two alternative scenarios, which lay out the main
implications for growth and inflation of shifts in
trade and fiscal policy. The scenarios are meant to be
Since Russia's invasion of Ukraine (February 2022)
Cold War (initial year: 1947)
Figure . Trade Fragmentation: Cold War and Now
(Percentage points)
−
−
−
Tra
de
se
m
i-e
la
st
ici
ty
fo
r �
ow
s
be
tw
ee
n
bl
oc
s
0 4 8 12 16 20 24 28 32 36
Number of quarters since the start of the episode
−
−
−
Tra
de
se
m
i-e
la
st
ici
ty
fo
r �
ow
s w
ith
no
na
lig
ne
d
co
un
tri
es
0 4 8 12 16 20 24 28 32 36
Number of quarters since the start of the episode
1. Trade between Blocs
2. Trade with Nonaligned Countries
Sources: Gopinath and others 2024; and IMF staff calculations.
Note: The figure plots the change in global trade between blocs (panel 1) and with
nonaligned countries (panel 2) during the Cold War (blue line, with t0 = 1947) and since
Russia’s invasion of Ukraine (red line, with t0 = 2021:Q4). For each episode, the figure
plots the semi-elasticity of trade for flows, estimated using a difference-in-differences
approach, with bilateral goods trade values on the y-axis, with importer-exporter,
importer-year, and exporter-year fixed effects controlled for, and the associated
90 percent confidence bands. The missing category is trade within blocs. The Cold War
results are obtained using yearly data from 1920 to 1990—excluding the World War II
years (1939–45), and with 1947 as an excluded year—and the bloc definition based on
Gokmen (2017). The results for the most recent period are based on quarterly trade data
from 2017:Q1 to 2024:Q1 (with 2021:Q4 as an excluded quarter), with the wider bloc
definition based on the ideal point distance (a measure based on voting patterns in the
United Nations General Assembly computed by Bailey, Strezhnev, and Voeten [2017]).
United States
Euro area
Developed markets: Manufacturing
Emerging markets: Manufacturing
Developed markets: Services
Emerging markets: Services
Figure . Continued Rotation to Services
1. Relative Price of Core Goods versus Core Services
(Core-goods-to-services ratio)
80
110
85
90
95
100
105
Jan.
2015
Jan.
17
Jan.
19
Jan.
21
Jan.
23
Jul.
24
2. Recent PMI trends
(Index, 50+ = expansion)
35
60
40
45
50
55
Jan.
2022
Jul.
22
Jan.
23
Jul.
23
Jan.
24
Aug.
24
Sources: Haver Analytics; and IMF staff calculations.
Note: Solid lines denote GDP growth from the October 2024 World Economic Outlook,
and dashed lines denote GDP growth forecasts from the April 2024 World Economic
Outlook, respectively. PMI = purchasing managers’ index.
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
8 International Monetary Fund | October 2024
illustrative but are quantitatively plausible alternatives
around the baseline (Box ).
• Commodity price assumptions: Oil prices are expected
to rise by percent in 2024 to about $81 a barrel
as production cuts by OPEC+ (Organization of
the Petroleum Exporting Countries plus selected
nonmember countries, including Russia), sustained
global oil demand growth, and geopolitical ten-
sions in the Middle East offset strong non-OPEC+
supply growth. Overall, however, prices for fuel
commodities are projected to fall on average by
percent—owing to declines in prices of natural gas
(by percent) and coal (by percent) as they
come off their 2022 peaks—but less rapidly than
assumed in April (Figure , panel 1). Food prices
are expected to decline by percent in 2024 and by
a further percent in 2025 as global grain produc-
tion is forecast to reach record highs in 2024–25.
• Monetary policy assumptions: Compared with that in
April 2024, the anticipated trajectory of policy rates
for major central banks in advanced economies has
shifted. In the euro area, 100 basis points of cuts
are expected in 2024 and 50 basis points in 2025,
bringing the policy rate to percent by June
2025. In the United States, the Federal Reserve
pivoted to cutting rates in September, starting with
a 50 basis point drop. The federal funds rate is pro-
jected to reach its long-term equilibrium of per-
cent in the third quarter of 2026, almost a year
earlier than what was expected in April. In Japan,
however, policy rate projections have been revised
upward (since the April 2024 World Economic
Outlook), reflecting the Bank of Japan’s rate hike in
July. The policy rate is projected to continue to rise
gradually over the medium term toward a neutral
setting of about percent, consistent with keeping
inflation and inflation expectations anchored at the
Bank of Japan’s 2 percent target.
• Fiscal policy assumptions: Governments in advanced
economies are on average expected to tighten their
fiscal policy stances in both 2024 and 2025, halv-
ing primary deficits by 2029. However, contrasts
between the euro area and the United States are
important. In the baseline, the US fiscal deficit is
only marginally trimmed down, remaining at about
percent in 2029, with about half of this reflect-
ing interest rate expenses. Under current policies,
the US public debt is not stabilized, reaching almost
134 percent of GDP in 2029. In the euro area, on
the other hand, the debt-to-GDP ratio is expected
to have stabilized already at about 88 percent in
2024, although with some cross-country differ-
ences. Large contrasts are apparent in the emerging
market and developing economies country group as
well. Whereas fiscal stances are expected to remain
relatively loose on average in emerging markets,
fiscal consolidation is ongoing among developing
economies. Over the past few years, many low-
income countries have either lost market access or
Energy
Food
United States
Euro area
Japan
Figure . Global Assumptions
1. Energy and Food Prices
(Index, 2022:Q4 = 100)
50
120
60
70
80
90
100
110
2022:Q4 23:Q4 24:Q4 25:
Q4
2. Monetary Policy Projections
(Percent, quarterly average)
0
−1
1
2
3
4
5
6
7
24:Q1 25:Q1 26:Q1 27:Q1 28:Q1 29:Q1 29:
Q4
2023:Q1
3. Fiscal Policy Projections
(Percentage points; change in fiscal balance)
−
−
2023 24 25 26
Advanced economies Emerging market and
developing economies
2023 24 25 26
Source: IMF staff calculations.
Note: In panels 1 and 2, solid lines denote projections from the October 2024 World
Economic Outlook and dashed lines from the April 2024 World Economic Outlook. Also,
the dotted line in panel 1 denotes projections from October 2023 World Economic
Outlook. In panel 3, the fiscal balance used is the general government structural
primary balance, which is the cyclically adjusted primary balance corrected for a
broader range of noncyclical factors such as changes in asset and commodity prices.
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
9International Monetary Fund | October 2024
been forced to drastically scale back deficits because
higher interest rates have pushed up borrowing
costs (see Chapter 1 of the October 2024 Global
Financial Stability Report). Forced consolidation is
expected to bring down their debt-to-GDP ratios to
percent in 2029 from percent in 2024, a
reduction of about percent of GDP every year.
Baseline Outlook: Stable Growth amid
Continuing Disinflation
Global growth is expected to remain broadly flat—
decelerating from percent in 2023 to percent by
2029—and is largely unchanged from World Economic
Outlook forecasts in April 2024 and October 2023
(Tables and ; Figure ).1 Under the surface,
however, offsetting revisions have brought major econ-
omies closer together as cyclical forces wane and GDP
moves closer to potential. As inflation recedes, policy
rates are expected to follow suit, preventing undue
increases in real interest rates. Interest rates are expected
to gradually descend toward their natural levels: the lev-
els of risk-free real interest rates compatible with output
at potential and inflation at target.
Although global revisions to the forecast since April
have been minimal, offsetting shifts at the country
group level reflect recent shocks and policies, most
notably in emerging market and developing econo-
mies. Cuts in production and shipping of commodities
(oil in particular), conflicts, and civil unrest have led
to downward revisions to the regional outlooks for
the Middle East and Central Asia and for sub-Saharan
Africa. At the same time, surging demand for semi-
conductors and electronics, driven by significant
investment in artificial intelligence, has fueled stronger
growth in emerging Asia.
Growth Outlook: Major Economies Draw
Closer Together
Following a reopening rebound in 2022, growth
in advanced economies markedly slowed in 2023 and
is projected to remain steady, oscillating between
and percent until 2029. This apparent stability
conceals differing country dynamics as various cycli-
cal forces unwind and economic activity gets back in
1For the global and regional aggregates, this World Economic
Outlook report uses the newly revised purchasing-power-parity GDP
weights based on the latest release from the International Compari-
son Program; see the Statistical Appendix for details.
line with potential. In the United States, growth is
expected to decelerate, with output reaching potential
from above by 2029. In the United Kingdom and
the euro area, on the other hand, activity is projected
to accelerate, closing the output gap from below. In
Japan, where the output gap is already closed, GDP is
expected to grow in line with potential.
• In the United States, projected growth for 2024 has
been revised upward to percent, which is
percentage point higher than the July forecast, on
account of stronger outturns in consumption and
nonresidential investment. The resilience of con-
sumption is largely the result of robust increases in
real wages (especially among lower-income house-
holds) and wealth effects. Growth is anticipated
to slow to percent in 2025 as fiscal policy is
gradually tightened and a cooling labor market
slows consumption. With GDP growth lower than
potential, the output gap is expected to start closing
in 2025.
• In the euro area, growth seems to have reached
its lowest point in 2023. A touch weaker than
projected in April and July 2024, GDP growth is
World
Advanced economies
Emerging market and developing economies
United States Euro area Japan
Korea China India
Brazil Mexico
Figure . Growth Outlook
1. Growth Outlook
(Percent; dashes = April 2024, dots = October 2023)
2023 24 25 26
2. Cyclical Forces Waning and Output Gaps Closing
(Percent)
−3
−2
−1
0
1
2
3
2023 24 25 26 27 28 29
Source: IMF staff calculations.
Note: In panel 1, solid lines denote GDP growth from the October 2024 World Economic
Outlook, and dashed and dotted lines denote GDP growth forecasts from the April 2024
World Economic Outlook and the October 2023 World Economic Outlook, respectively.
0
1
2
3
4
5
6
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
10 International Monetary Fund | October 2024
Table . Overview of the World Economic Outlook Projections
(Percent change, unless noted otherwise)
Projections
Difference from July
2024 WEO Update1
Difference from April
2024 WEO1
2023 2024 2025 2024 2025 2024 2025
World Output –
Advanced Economies
United States
Euro Area – – –
Germany – – – – –
France – –
Italy –
Spain
Japan – –
United Kingdom
Canada
Other Advanced Economies2 –
Emerging Market and Developing Economies –
Emerging and Developing Asia – –
China –
India3
Emerging and Developing Europe – –
Russia – –
Latin America and the Caribbean –
Brazil –
Mexico – – – –
Middle East and Central Asia – –
Saudi Arabia – – – – –
Sub-Saharan Africa – –
Nigeria – –
South Africa
Memorandum
World Growth Based on Market Exchange Rates
European Union – – –
ASEAN-54 –
Middle East and North Africa – – –
Emerging Market and Middle-Income Economies –
Low-Income Developing Countries – – – –
World Trade Volume (goods and services)
Imports
Advanced Economies – – – –
Emerging Market and Developing Economies –
Exports
Advanced Economies – – –
Emerging Market and Developing Economies
Commodity Prices (US dollars)
Oil5 – – – –
Nonfuel (average based on world commodity import
weights)
– – – –
World Consumer Prices6 – – – –
Advanced Economies7 – – –
Emerging Market and Developing Economies6 – – –
Source: IMF staff estimates.
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 30, 2024–August 27, 2024. Economies are listed on the
basis of economic size. The aggregated quarterly data are seasonally adjusted. WEO = World Economic Outlook.
1 Difference based on rounded figures for the current, July 2024 WEO Update, and April 2024 WEO forecasts. Global and regional growth figures are based on
new purchasing-power-parity weights derived from the recently released 2021 International Comparison Program survey (see Box A2) and are not comparable
to the figures reported in the July 2024 WEO Update or the April 2024 WEO.
2 Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area countries.
3 For India, data and forecasts are presented on a fiscal year basis, and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as a
base year.
4 Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
5 Simple average of prices of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil. The average price of oil in US dollars a barrel was $ in 2023;
the assumed price, based on futures markets, is $ in 2024 and $ in 2025.
6 Excludes Venezuela. See the country-specific note for Venezuela in the “Country Notes” section of the Statistical Appendix.
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
11International Monetary Fund | October 2024
Table . Overview of the World Economic Outlook Projections (continued)
(Percent change, unless noted otherwise)
Q4 over Q48
Projections
Difference from July
2024 WEO Update1
Difference from April
2024 WEO1
2023 2024 2025 2024 2025 2024 2025
World Output –
Advanced Economies –
United States
Euro Area – – – –
Germany – – – – –
France – –
Italy –
Spain – –
Japan – –
United Kingdom – – –
Canada – –
Other Advanced Economies2 – – –
Emerging Market and Developing Economies –
Emerging and Developing Asia
China – –
India3
Emerging and Developing Europe – – –
Russia – –
Latin America and the Caribbean –
Brazil
Mexico – – –
Middle East and Central Asia . . . . . . . . . . . . . . . . . . . . .
Saudi Arabia – – – –
Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . .
Nigeria
South Africa –
Memorandum
World Growth Based on Market Exchange Rates –
European Union – – –
ASEAN-54 –
Middle East and North Africa . . . . . . . . . . . . . . . . . . . . .
Emerging Market and Middle-Income Economies –
Low-Income Developing Countries . . . . . . . . . . . . . . . . . . . . .
Commodity Prices (US dollars)
Oil5 – – – – –
Nonfuel (average based on world commodity import
weights)
– –
World Consumer Prices6 – – –
Advanced Economies7 – –
Emerging Market and Developing Economies6 – – – –
7 The assumed inflation rates for 2024 and 2025, respectively, are as follows: percent and percent for the euro area, percent and percent for
Japan, and percent and percent for the United States.
8 For world output, the quarterly estimates and projections account for approximately 90 percent of annual world output at purchasing-power-parity weights.
For emerging market and developing economies, the quarterly estimates and projections account for approximately 85 percent of annual emerging market and
developing economies’ output at purchasing-power-parity weights.
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
12 International Monetary Fund | October 2024
expected to pick up to a modest percent in 2024
as a result of better export performance, in partic-
ular of goods. In 2025, growth is projected to rise
further to percent, helped by stronger domestic
demand. Rising real wages are expected to boost
consumption, and a gradual loosening of monetary
policy is expected to support investment. Persistent
weakness in manufacturing weighs on growth for
countries such as Germany and Italy. However,
whereas Italy’s domestic demand is expected to ben-
efit from the European Union–financed National
Recovery and Resilience Plan, Germany is experi-
encing strain from fiscal consolidation and a sharp
decline in real estate prices.
• Offsetting dynamics are also at play among other
advanced economies. Growth is expected to deceler-
ate in Japan in 2024, with the slowdown reflecting
temporary supply disruptions and fading of one-off
factors that boosted activity in 2023, such as the
surge in tourism. With respect to April, growth
is revised downward, by percentage point, to
percent for 2024, reflecting a temporary supply
disruption in the car industry and the base effect of
historical data revisions. An acceleration to is
predicted in 2025, with growth boosted by private
consumption as real wage growth strengthens. In
the United Kingdom, in contrast, growth is projected
to have accelerated to percent in 2024 and is
expected to continue doing so to percent in
2025 as falling inflation and interest rates stimulate
domestic demand.
Growth Outlook: Emerging Markets Get
Support from Asia
In a manner similar to that for advanced economies,
the growth outlook for emerging market and devel-
oping economies is remarkably stable for the next two
years, hovering at about percent and steadying at
percent by 2029. And just as in advanced econo-
mies, offsetting dynamics are occurring between coun-
try groups. Compared with that in April, growth in
emerging market and developing economies is revised
upward by percentage point for 2024, reflecting
upgrades for Asia (China and India) that more than
offset downgrades for sub-Saharan Africa and for the
Middle East and Central Asia (Table ).
• Emerging Asia’s strong growth is expected to subside,
from percent in 2023 to percent in 2025.
This reflects a sustained slowdown in the region’s
two largest countries. In India, the outlook is for
GDP growth to moderate from percent in 2023
to 7 percent in 2024 and percent in 2025,
because pent-up demand accumulated during the
pandemic has been exhausted, as the economy
reconnects with its potential. In China, the slow-
down is projected to be more gradual. Despite
persisting weakness in the real estate sector and low
consumer confidence, growth is projected to have
slowed only marginally to percent in 2024,
largely thanks to better-than-expected net exports.
Compared with that in April, the forecast has been
revised upward by percentage point in 2024 and
Table . Overview of the World Economic Outlook Projections at Market Exchange Rate Weights
(Percent change)
Projections
Difference from July
2024 WEO Update1
Difference from April
2024 WEO1
2023 2024 2025 2024 2025 2024 2025
World Output
Advanced Economies
Emerging Market and Developing Economies –
Emerging and Developing Asia – –
Emerging and Developing Europe – – –
Latin America and the Caribbean – –
Middle East and Central Asia – – –
Sub-Saharan Africa – –
Memorandum
European Union – –
Middle East and North Africa – – –
Emerging Market and Middle-Income Economies – –
Low-Income Developing Countries – – – –
Source: IMF staff estimates.
Note: The aggregate growth rates are calculated as a weighted average, in which a moving average of nominal GDP in US dollars for the preceding three years is
used as the weight. WEO = World Economic Outlook.
1 Difference based on rounded figures for the current, July 2024 WEO Update, and April 2024 WEO forecasts.
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
13International Monetary Fund | October 2024
percentage point in 2025. Recent policy mea-
sures may provide upside risk to near-term growth.
• In contrast, growth in the Middle East and Cen-
tral Asia is projected to pick up from an estimated
percent in 2023 to percent in 2025, as the
effect on the region of temporary disruptions to oil
production and shipping are assumed to fade away.
Compared with that in April, the projection has
been revised downward by percentage point for
2024, mainly the result of the extension of oil pro-
duction cuts in Saudi Arabia and ongoing conflict in
Sudan taking a large toll.
• In sub-Saharan Africa, GDP growth is similarly pro-
jected to increase, from an estimated percent in
2023 to percent in 2025, as the adverse impacts
of prior weather shocks abate and supply constraints
gradually ease. Compared with that in April, the
regional forecast is revised downward by per-
centage point for 2024 and upward by percent-
age point for 2025. Besides the ongoing conflict
that has led to a 26 percent contraction of the
South Sudanese economy, the revision reflects slower
growth in Nigeria, amid weaker-than-expected activ-
ity in the first half of the year.
• In Latin America and the Caribbean, growth is
projected to decline from percent in 2023 to
percent in 2024 before rebounding to per-
cent in 2025. In Brazil, growth is projected at
percent in 2024 and percent in 2025. This
is an upward revision of percentage point for
2024, compared with July 2024 World Economic
Outlook Update projections, owing to stronger
private consumption and investment in the first half
of the year from a tight labor market, government
transfers, and smaller-than-anticipated disruptions
from floods. However, with the still-restrictive mon-
etary policy and the expected cooling of the labor
market, growth is expected to moderate in 2025.
In Mexico, growth is projected at percent in
2024, reflecting weakening domestic demand on the
back of monetary policy tightening, before slowing
further to percent in 2025 on a tighter fiscal
stance. Overall, offsetting revisions leave the regional
growth forecast broadly unchanged since April.
• Growth in emerging and developing Europe is
projected to remain steady at percent in 2024
but to ease significantly to percent in 2025.
The moderation reflects a sharp slowdown in
Russia from percent in 2023 to percent in
2025 as private consumption and investment slow
amid reduced tightness in the labor market and
slower wage growth. In Türkiye, growth is expected
to slow from percent in 2023 to percent
in 2025, with the slowdown driven by the shift
to monetary and fiscal policy tightening since
mid-2023.
Inflation Outlook: Gradual Decline to Target
Although bumps on the path to price stability are
still possible, global headline inflation is projected to
decrease further, from an average of percent in
2023 to percent in 2024 and percent in 2025
in the baseline. Disinflation is expected to be faster in
advanced economies—with a decline of 2 percentage
points from 2023 to 2024 and a stabilization at about
2 percent in 2025—than in emerging market and
developing economies, in which inflation is projected
to decline from percent in 2023 to percent
in 2024 and then fall at a faster pace in 2025 to
percent.
There is a great deal of variation across emerging
market economies, however, which is evident in the
difference between median and average inflation
(Figure , panel 1). Inflation in emerging Asia is
projected to be on par with that in advanced econ-
omies, at percent in 2024 and percent in
2025, in part thanks to early monetary tightening
and price controls in many countries in the region. In
contrast, inflation forecasts for emerging and develop-
ing Europe, the Middle East and North Africa, and
sub-Saharan Africa remain in double-digit territory on
account of large outliers amid pass-through of past cur-
rency depreciation and administrative price adjustment
(Egypt) and underperformance in agriculture (Ethi-
opia). For most countries in Latin America and the
Caribbean, inflation rates have dropped significantly
from their peaks and continue to be on a downward
trend. However, large countries in the region have
experienced upward revisions since the April 2024
World Economic Outlook that reflect a mix of (1) robust
wage growth preventing faster disinflation in the
services sector (Brazil, Mexico), (2) weather events
(Colombia), and (3) hikes in regulated electricity tariffs
(Chile).
The decline in global inflation in 2024 and 2025
reflects a broad-based decrease in core inflation,
unlike the situation in 2023, when headline infla-
tion fell mainly because of lower fuel prices. Core
inflation is expected to drop by percentage
points in 2024, following a percentage point
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
14 International Monetary Fund | October 2024
decrease in 2023, with advanced economies leading
this decline. Factors contributing to lower core infla-
tion include the delayed effect of tight monetary
policies as well as diminishing pass-through effects
from earlier declines in prices, especially in those for
energy.
Overall, returning inflation to target is expected
to take until 2025 in most cases. Although the
pace of disinflation for the median economy has
been faster than expected in October 2023, the
dispersion across economies is now expected to be
larger. Comparison of official inflation targets with
the latest forecasts for a representative group of
inflation-targeting advanced and emerging market
economies suggests that annual average inflation will
exceed targets (or the midpoints of target ranges)
in more than three-quarters of these economies in
2025 (Figure , panel 2). But a great deal of this
reflects annual carryover effects from 2024. Infla-
tion is expected to decline steadily on a sequential
basis, and by the end of 2025, most economies are
expected to be either at target or within a stone’s
throw of it.
Medium-Term Outlook: A Low-Growth
Regime Setting In
Absent a strong drive for structural reforms, output
growth is expected to remain weak over the medium
term (see Chapter 3 of the April 2024 World Economic
Outlook).
Although monetary policy is expected to return to
a neutral stance by 2025 in the world’s largest econo-
mies, growth in most economies is expected to remain
feeble over the medium term. For many advanced
and emerging market economies, the five-year-ahead
forecast is weaker than the one-year-ahead forecast
(Figure ), suggesting that persistent headwinds to
growth will remain prevalent over the medium term.
Structural challenges such as population aging,
weak investment, and historically low total factor
productivity growth are still holding back global
growth. The five-year-ahead forecast for global growth
stands at percent, indicating continued medio-
cre medium-term prospects relative to prepandemic
forecasts. Compared with those in April 2024, medi-
um-term growth prospects for advanced economies
are unchanged. Although investment is expected to
AEs median
AEs average
EMDEs median
EMDEs average
Oct. 2023 WEO Apr. 2024 WEO Oct. 2024 WEO
Figure . Inflation Outlook
0
12
2
4
6
8
10
2. Inflation Outlook
(Percentage points; deviation from inflation target)
1. Inflation in AEs and EMDEs
(Percent)
−4
6
−2
0
2
4
Sources: Central bank websites; Haver Analytics; and IMF staff calculations.
Note: In panel 1, the averages are calculated using purchasing-power-parity GDPs as
weights. Panel 2 shows the distribution (box-whisker plot) from each WEO report. The
blocks in the middle of the boxes are the medians, and the upper (lower) limits of the
boxes are the third (first) quartile. The whiskers show the maximum and minimum
within a boundary of times the interquartile range from upper and lower quartiles,
respectively. AEs = advanced economies; EMDEs = emerging market and developing
economies; WEO = World Economic Outlook.
292018 19 20 21 22 23 24 25 26 27 28
2024 25 26
LIDCs
AEs
EMMIEs
Figure . Medium-Term Outlook
(Percent)
0
2
4
6
8
10
Fiv
e-
ye
ar-
ah
ea
d
fo
re
ca
st
(2
02
9
gr
ow
th
)
0 2 4 6 8 10
One-year-ahead forecast (2025 growth)
45-degree line
Source: IMF staff calculations.
Note: Bubble size reflects size of the economy using 2024 GDP in
purchasing-power-parity international dollars. Data labels in the figure use
International Organization for Standardization (ISO) country codes. AEs = advanced
economies; EMMIEs = emerging market and middle-income economies; LIDCs =
low-income developing countries.
USA
JPN
DEU
GBR
FRA
CHN
IND
IDN
RUS
BRA
BGD
NGA
ETH
UZB
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
15International Monetary Fund | October 2024
pick up and productivity growth is also expected to
see some normalization, the continued demographic
drag is likely to produce an offsetting effect. Cerdeiro,
Hong, and Kammer (2024) discuss underlying drivers
of recent productivity divergence between the United
States and euro area economies that may continue to
define medium-term growth trends in these economies.
For emerging market and developing economies,
medium-term growth prospects have not improved
compared with those in the April 2024 World Eco-
nomic Outlook and are still much weaker than they
were in prepandemic projections. This partly reflects
prolonged scarring from the shocks of the past few
years, especially for low-income developing countries.
It also reflects a slower pace of structural reforms,
which is holding back productivity growth.
Projected slowdowns in the largest emerging market
and developing economies imply a longer path to close
the income gaps between poor and rich countries.
Having growth stuck in low gear could also further
exacerbate income inequality within economies. IMF
staff analysis suggests that periods of low economic
growth lasting four years or more tend to widen
income inequality within countries, because sluggish
job creation and wage growth—as well as weaker fiscal
positions preventing redistribution—tend to affect
low-income earners disproportionately (IMF 2024).
Trade Growth Historically Low, yet in Line with
Output Growth
Global trade is expected to continue to grow
in line with GDP, reaching an average of 3¼ per-
cent growth annually in 2024 and 2025, following
a period of near stagnation in 2023. Despite an
increase in cross-border restrictions affecting trade
between geopolitically distant blocs, the global trade-
to-GDP ratio is expected to remain stable. Intrabloc
trade and trade with third countries have been com-
pensating forces so far.
Meanwhile, global current account balances––
the sums of absolute surpluses and deficits––are
expected to continue to decline from their 2022 peaks
(Figure ). As reported in the IMF’s 2024 External
Sector Report, the significant moderation of current
account balances in 2023 toward prepandemic levels
reflected a reversal of large current account surpluses in
commodity-exporting countries, continued economic
recovery from the pandemic, and a slowdown in global
goods trade during 2023. Over the medium term,
global balances are expected to narrow gradually as
commodity prices decline. Creditor and debtor stock
positions reached historically elevated levels in 2022,
with the increases reflecting widening current account
balances. They are expected to moderate slightly over
the medium term as current account balances gradually
narrow. In some economies, gross external liabilities
remain large from a historical perspective and pose
risks of external stress.
Risks to the Outlook: Tilted to the
Downside
The most prominent risks and uncertainties
surrounding the outlook are now discussed. A mod-
el-based analysis that quantifies risks to the global
outlook and plausible scenarios—including shifts in
trade and fiscal policies—is presented in Box .
European creditors European debtors
China United States
Japan Others
Oil exporters Discrepancy
Figure . Current Account and International Investment
Positions
(Percent of global GDP)
1. Global Current Account Balance
2. Global International Investment Position
Source: IMF staff calculations.
Note: European creditors are Austria, Belgium, Denmark, Finland, Germany,
Luxembourg, The Netherlands, Norway, Slovenia, Sweden, and Switzerland; European
debtors are Cyprus, Greece, Ireland, Italy, Portugal, and Spain; oil exporters are Algeria,
Azerbaijan, Iran, Kazakhstan, Kuwait, Nigeria, Oman, Qatar, Russia, Saudi Arabia, the
United Arab Emirates, and Venezuela.
−3
−2
−1
0
1
2
3
2005 07 09 11 13 15 17 19 21 23 25 27 29
2005 07 09 11 13 15 17 19 21 23 25 27 29
−30
−20
−10
0
10
20
30
WORLD ECONOMIC OUTLOOK: POLIC Y PIVOT, RISING THRE ATS
16 International Monetary Fund | October 2024
Downside Risks
Since the July 2024 World Economic Outlook Update,
adverse risks have gained more prominence.
• Monetary policy tightening bites more than intended.
Although policy rates are projected to normalize,
an unanticipated back-loaded strengthening of the
transmission of earlier rate increases could lead to
a faster-than-anticipated deceleration in near-term
growth and rising unemployment. Though the
impact on growth is unlikely to be persistent given
concurrent policy easing, a rapid weakening of
activity could also work its way adversely through
consumer and business sentiment. This would place
a stronger drag on household spending and prompt
businesses to dial back their investment plans, either
(or both) of which could create a negative feedback
loop to growth. In such circumstances, however,
lower energy prices would cushion some of the neg-
ative effects on growth as lower demand would push
oil prices down.
• Financial markets reprice as a result of monetary
policy reassessments. The global economy is at the
last mile of disinflation, which may present greater
challenges to monetary policy than expected if
the cost of reducing inflation in terms of unem-
ployment (the sacrifice ratio) is closer to prepan-
demic estimates than suggested by recent evidence
(Figure , panel 1). If underlying inflation
proves more persistent than expected, consumers
may adjust their near-term inflation expectations
(Figure ), forcing central banks to adjust the
path of monetary policy normalization. This would
weaken consumer and business confidence, lead
to market repricing and tighter financial condi-
tions, and slow economic recovery. Given existing
vulnerabilities (see Chapter 1 of the October 2024
Global Financial Stability Report), financial market
turbulence could resurge, prompting sizable price
