The IMF expects global economic growth to remain resilient in 2024, forecasting an expansion of 3.2%. IMF First Deputy Managing Director Gita Gopinath joins Yahoo Finance's Jennifer Schonberger to discuss the key global market dynamics shaping this outlook.
Gopinath explains that growth has been slowing since the early 2000s, driven by three primary factors: weakening productivity growth, aging demographics and declining working-age populations, and decreasing overall investments. She noted that while AI "has the potential" to strengthen productivity growth, it is still "too early to say that that's the solution."
On the inflation front, Gopinath highlights the risks posed by commodities like oil, given heightened tensions in the Middle East following Iran's attack on Israel. However, she believes the situation has not yet reached a point "where we could see oil prices shooting up," noting that there are "alternate sources of supply that can make up for it." Gopinath also observes that European inflation "has been coming down really well," while US inflation "has been holding up a little more stubbornly;" she predicts the ECB could cut rates in June, but the Fed may wait.
Regarding the US economy, Gopinath acknowledged that growth "has exceeded anybody's most optimistic expectations." She expects inflation to continue to decline gradually but cautions that the "last mile" to the target will be "bumpy," necessitating patience from the Fed.
Finally, Gopinath commented on China, noting that the economy is showing signs of resilience, with first quarter GDP growth at 5%. However, she notes that the nation has "important issues to deal with" in its property sector and overall consumer confidence.
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