A top economist at the International Monetary Fund says there is little risk of a global recession despite ongoing geopolitical uncertainty.
The Washington, D.C.-based institute this week slightly raised its forecast for global economic growth to 3.2% in 2024 and expects it to remain at the same level in 2025.
“When we assess risk around that baseline, the likelihood of something like a global recession is quite small. It would take a lot to derail the economy at this point. So there’s huge resilience in terms of growth,” IMF said. Pierre-Olivier Gourinchas, economic adviser and director of research, told CNBC’s Karen Tso at the group’s conference in New York on Tuesday.
Gurinchas said the “series of good news” included strong economic performance in the United States and several emerging market economies, as well as inflation falling faster than near-term expectations despite weak growth in Europe.
He added that there were divisions within Europe, with the IMF downgrading growth forecasts for Germany, France and Italy but raising those for Spain, Portugal, Belgium and the UK.
Growth forecasts since last fall have had to take into account rising geopolitical instability, with tensions in the Middle East hanging over oil markets, while Israel’s war with the Palestinian militant group Hamas in the Gaza Strip has disrupted Red Sea shipping routes and fueled insurgents from Yemen’s Houthi rebels. Sea attack. This all combines with the ongoing Russia-Ukraine war, which has the broadest impact on European energy prices in 2022.
Gourinchas pointed out that oil prices will continue to rise sharply in 2024, and further disruptions in transportation between Asia and Europe will exacerbate inflation in 2024, leading central banks to maintain higher interest rates for a longer period of time and putting pressure on global economic growth.
A sustained rise in oil prices of about 15% in 2024 would push global inflation by about 0.7% in 2024, according to International Monetary Fund estimates, although the commodity’s value has so far remained relatively stable even with the recent rise in tensions between Israel and Iran.
Despite the optimistic latest forecasts, International Monetary Fund Deputy Managing Director Gita Gopinath told CNBC on Tuesday that she assessed geopolitical risks as “a big concern.”
“So far we have managed the situation in some way, we have not seen major spillovers from the Middle East. But that is not a given. This is one of the big risks that we do see that could have an impact on oil prices If the conflict escalates, it could become bigger,” she said.
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