IMF forecast: GDP growth in the United States will be 2.1% in 2024, Japan will be 0.9%, what about China?

In 2023, both the economies of China and the United States have achieved good growth, with China growing by 5.2% and the United States growing by 2.5%, so what will happen to the economy in 2024?

Recently, the International Monetary Fund (IMF) released the latest World Economic Outlook, predicting that the global economy will grow by 3.1% in 2024, an increase of 0.2 percentage points from the forecast in October last year.

Some time ago, both the United Nations and the World Bank gave pessimistic forecasts for the global economy in 2024, and both institutions predicted that global economic growth would slow down to 2.4%.

The IMF's optimistic forecast is due to the steady decline in inflation, which will fall to 4.9% this year, with the exception of Argentina. Demand continues to strengthen, while supply chains are repairing and energy and commodity prices are falling, which are all positive factors for the economy. The dark clouds of the global economy are beginning to lift and we are entering the final phase of a soft landing.

Specifically, the U.S. economy is expected to grow by 2.1% in 2024, a sharp increase of 0.6 percentage points from the October forecast last year. The reason for the upward revision is that the U.S. economy has grown more than expected in 2023, and the economic growth has continued to rise for four quarters, showing very strong resilience.

At present, the U.S. non-farm payrolls data is very good, and the latest data released by the U.S. Bureau of Labor showed that the number of non-farm payrolls increased by 353,000 in January, significantly exceeding market expectations. In addition, the average hourly wage growth rate in the United States reached 4.5% year-on-year in January, and wages are also rising sharply.

However, most international institutions predict a slowdown in the U.S. economy in 2024. The reason is that monetary tightening is still in effect, and the IMF predicts that the Fed's policy rate will remain at current levels until the second half of 2024. In the past two days, the Federal Reserve held a meeting, which also sent a signal that the probability of a rate cut in March is low.

There is also the disappearance of excess savings by U.S. residents, which will dampen investment and consumption in the United States. Despite the slowdown, 2.1% is a very good growth rate.

The eurozone is expected to grow by 0.9 percent, down 0.3 percentage points from its October forecast, but still up from 0.5 percent in 2023. Among them, Germany increased by 0.5%, France by 1%, Italy by 0.7%, and Spain by 1.5%.

In 2023, the eurozone's economy will be miserable. Germany, the largest economy, turned out to be negative, with an increase of -0.3%, and was called the "sick man of Europe" by the British and Japanese media. France had zero growth in the fourth quarter, with GDP growth of 0.9% for the year, less than 1%, and the rest of the economy was mediocre.

The good news is that the impact of the energy price shock is fading, inflation is falling, and consumption is gradually strengthening, which will boost the eurozone's economic growth.

Among advanced economies, Japan's growth will also slow, from 1.9% in 2023 to 0.9% in 2024. The UK also grew by only 0.6 per cent and Canada by 1.4 per cent.

Emerging markets have been resilient, with stronger-than-expected growth. The IMF expects India's economic growth to continue to be strong, with a growth rate of 6.5% in 2024, which is expected to be the fastest among the world's largest economies. In addition, Russia is expected to grow by 2.6% and Brazil by 1.7%.

For China's economic performance in 2024, the IMF gave a growth forecast of 4.6%, which is 0.4 percentage points higher than the forecast in October last year. However, it is 0.6 percentage points lower than the actual growth rate of 5.2% in 2023.

In fact, not only the IMF, but also the World Bank and the United Nations predict that China's economic growth will slow down in 2024, with growth forecasts of 4.5% and 4.7% respectively, both of which are below 5%.

However, all 31 provinces and cities in mainland China have set economic growth targets for 2024, with all but Tianjin being below 5%, or about 5%. Generally speaking, Beijing's growth target is similar to the national growth target, so the mainland's economic growth target for 2024 is expected to be around 5%, higher than the forecasts of the three international institutions.

Why is the confidence of the three major international institutions not as good as ours? The IMF gives the argument that weak consumption and investment continue to weigh on economic activity.

Consumption is the primary driving force for the mainland's economic growth, and final consumption expenditure will contribute 82.5% to economic growth in 2023, a record high. In previous years, the contribution rate of consumption was around 60%, and the contribution rate in 2023 is so high, mainly because of the low consumption base in 2022, which is -0.2%.

In 2024, consumption will gradually return to normal, and it will be difficult to have such a high growth rate, and the contribution rate to the economy will also decline. However, judging from the policies and measures of various departments at the beginning of the year, consumption is still pinned on high hopes. Therefore, policies to stimulate consumption are crucial. Of course, as many netizens said, who is not willing to consume if you have money, improving the employment environment and increasing residents' income is the most effective way to stimulate consumption.

As for the weakness in investment, it is not expected to occur. In 2024, investment should continue to play a role in "stabilizing growth", especially infrastructure investment, which has a strong role in supporting the economy and will continue to increase its efforts. In addition, manufacturing investment will continue to accelerate, while real estate investment will still decline, but the decline will be narrower. Overall, the contribution of investment to the economy will increase in 2024.

For China's real estate, the IMF has given three suggestions, one is to increase the "delivery of real estate", the second is to relax loans, and the third is to reduce housing price restrictions. In fact, these points have been done, and many places have put some real estate companies on the white list to provide them with financing. The threshold for borrowing is also lowering, with down payments already down to 20% in many places and expected to be even lower in the future. In addition, various purchase restrictions are also gradually lifted.

The real estate sector, which accounts for up to 20% of the economy, remains crucial. If the real estate market does not pick up, various policies and measures will continue to emerge.

Finally, exports, the IMF expects world trade to grow by 3.3% in 2024, which is good for us. When external demand rises, exports will inevitably turn negative to positive, and the contribution rate of net exports to economic growth will also turn from negative to positive. At present, we need to stabilize the two major markets of the United States and the European Union, and continue to develop markets such as ASEAN, Russia, and the Middle East. There is no doubt that we also need to reduce our over-reliance on certain markets.

Compared with 2023, the growth in 2024 will definitely slow down, but the growth rate is still not low, and it is good to make psychological expectations.