IMF
Says World Economy is Doing Well in 2025, India Leading in Growth Rate!
THE NUMBERS: World
Economy at the End of 2024 –
|
2020 |
2024 |
|
|
|
Population |
7.8 billion |
8.2 billion |
Absolute poverty rate |
9.7% |
9.0% |
GDP (real 2024 dollars) |
$93.8 trillion |
$110.7 trillion |
(U.S.) |
($25.4 trillion) |
($29.2 trillion) |
Trade flows |
$22.7 trillion* |
~$33 trillion |
Operating satellites |
~2,500 |
~9,500 |
Live submarine cables |
400 |
600 |
Container-ship capacity |
25.8 million TEU |
32 million TEU |
Widebody freighter air fleet |
2,010 |
2,340 |
* Anomalously low
due to COVID-19 economic closures. The 2019 total was $25.0 trillion.
WHAT THEY MEAN:
Peering into the
near future in its “World Economic Outlook” update last Thursday, the International
Monetary Fund sees a “normalizing” 2025 for the world economy. The Fund’s mighty
banks of computers, integrating figures on savings rates, energy costs, retirements,
fiscal balances, investment levels, debt loads, and the like, arrive at projections
of worldwide growth of 3.3%, fading inflation, and interest rates possibly trending
down. Economic Counsellor Pierre-Olivier Gourinchas summarizes
the “data-driven” outlook:
“We project global
growth will remain steady at 3.3% this year [as against 3.2% in 2024 and 2023],
broadly aligned with potential growth … inflation is declining, to 4.2% this year
and 3.5% next year, which will allow further normalization of monetary policy. This
will help draw to a close the global disruptions of recent years, including the
pandemic and the Russian invasion of Ukraine.”
Dr. Gourinchas goes on to note some variability of
growth among big economies, noting that the U.S. and China are the relatively strong-growth
big economies, though both with some asterisks. China’s boom era is past: its 4.5%
growth projection is now similar to the 4.2% the IMF sees for other “emerging economies”
and the 4.1% for low-income countries, and well below India’s 6.5%. Benefiting from
relatively high productivity growth, meanwhile, American living standards are “pulling
away from those of other advanced economies”; but the U.S. has higher inflation
risk than its peers for other reasons: a likely rising budget deficit, plus immigration
and tariff plans seen as stagflationary.* Continental Europe, on the other hand,
is slower than it should be, with 1.0% growth — a bit below the 1.6% for the U.K.
and the 1.1% for Japan.
The projections
suggest general calm, a prospering if not booming world, and the sort of problems
that usually come up in normal times. Data cited above from other venues — trade
flows, rising air and maritime logistical capacity, rapid satellites and fiber-optic cable deployment, a slowly falling rate of deep
poverty — all seem to say this needn’t stop any time soon. So
here’s J.M. Keynes in The Economic Consequences of the Peace (1919) to remind
us of how quickly and badly things can go wrong when — despite equations, data,
and rational predictions drawn from them — governments and publics make poor choices:
“What an extraordinary
episode in the economic progress of man that age was, which came to an end in August,
1914! … [For] the middle and upper classes, life offered, at a low cost and with
the least trouble, conveniences, comforts, and amenities beyond the compass of the
richest and most powerful monarchs of other ages. The inhabitant of London could
order by telephone, sipping his morning tea in bed, the various products of the
whole earth, in such quantity as he might see fit, and reasonably expect their early
delivery upon his doorstep; he could at the same moment and by the same means adventure
his wealth in the natural resources and new enterprises of any quarter of the world,
and share, without exertion or even trouble, in their prospective fruits and advantages;
or he could decide to couple the security of his fortunes with the good faith of
the townspeople of any substantial municipality in any continent that fancy or information
might recommend.”
“[H]e regarded
this state of affairs as normal, certain, and permanent, except in the direction
of further improvement, and any deviation from it as aberrant, scandalous, and avoidable.
The projects and politics of militarism and imperialism, of racial and cultural
rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent
to this paradise, were little more than the amusements of his daily newspaper, and
appeared to exercise almost no influence at all on the ordinary course of social
and economic life.”
Back to the IMF
for the last word: Dr. G. is more alert to this sort of
risk than was Keynes’ wealthy and oblivious Londoner just before the First World
War. His closing comment steps back from data-driven optimism to anxiety about policy
and human choices:
“Finally, additional
efforts should be made to strengthen and improve our multilateral institutions to
help unlock a richer, more resilient, and sustainable global economy. Unilateral
policies that distort competition—such as tariffs, nontariff barriers, or subsidies—rarely
improve domestic prospects durably. They are unlikely to ameliorate external imbalances
and may instead hurt trading partners, spur retaliation, and leave every country
worse off.”
* Direct quote: “Will
play out like negative supply shocks, reducing output and adding to inflation.”