While the International Monetary Fund (IMF) was divulging the data on global economic projections yesterday, someone in the Kremlin would surely be celebrating.
Because Russia aims for a growth of 2.6% this year and exceeds that of most countries that have imposed sanctions on it for the war in Ukraine. The IMF highlights that the volume of oil exports is sustained (obviously, despite the Western embargo), in addition to being able to count on activity supported by public defense spending.
The economic data for 2024 are eloquent: Russia will grow almost three times faster than the Europeans, who have launched up to 16,000 sanctions on Russians, as the eurozone will rebound by a modest 0.9%. "However, the behavior of the "the Russian economy is lower than what it used to register before the war", specify the economists of the Fund. But it's still a small victory, even if it's a small one.
If the war in Ukraine seems to have taken a greater toll on Europe than on the Russians, the other war, the one in the Middle East, has unpredictable consequences. The body expects Israel's gross domestic product to grow 1.6% this year, up from 3% in its October report, before the conflict began.
Nor can it be ruled out that there is a contagion in other countries. In the event of an extension of a military conflict in the region, global inflation could rise 70 basis points in 2024. Oil prices would climb up to 15% more. But core inflation could also rise by as much as 30 basis points, due to shipping disruptions and rising costs. The Fund's estimates predict, in this case, a 150% increase in rents.
As a result, interest rates could be up to 40 basis points higher in 2025 than initially planned. This would affect the purchasing power of consumers and cause a loss of global GDP of 0.4%.
Moreover, Europe's weakness is not only with respect to Russia, but the economic gap with the United States is widening. Because the locomotive of the United States pulls more than expected, with domestic consumption and the labor market as mainstays. The IMF has improved US growth by six tenths, up to 2.7%. A rate that is almost double that of most G-7 economies.
"The exceptional recent performance of the United States is certainly impressive and an important driver of global growth," the report says. As already mentioned on Friday, Spain stands out with 1.9% and 2.1%, for this year and the next. Among the large industrialized economies, only the USA and Canada will grow more than Spain between now and 2025.
Many countries will have elections this year and this element, for the Fund, is a factor of instability. For two reasons. First, due to the rise of populism, as several polls point out.
“In the context of the upcoming elections, many countries are preparing to adopt measures to raise barriers to the international flow of workers, which could exacerbate the labor crisis, labor shortages and inflationary pressures. Also, tariff increases could trigger retaliation, increase costs and harm the profitability of companies and the well-being of consumers", writes the IMF.
In addition, in the vicinity of the electoral dates – remember – governments tend to be more generous and to increase public spending. "These fiscal expansions could also increase inflation and this would translate into higher interest rates, which would increase the difficulty of reducing the debt."
By the way, global growth this year and next will be, according to the IMF, at 3.3%, a stable rate but lower than the average of the last 20 years.
