Our
global
growth
projections
are
unchanged
at
3.2
percent
this
year
and
slightly
higher
at
3.3
percent
for
next
year,
but
there
have
been
notable
developments
beneath
the
surface
since
the April
World
Economic
Outlook.
Growth
in
major
advanced
economies
is
becoming
more
aligned
as
output
gaps
are
closing.
The
United
States
shows
increasing
signs
of
cooling,
especially
in
the
labor
market,
after
a
strong
2023.
The
euro
area,
meanwhile,
is
poised
to
pick
up
after
a
nearly
flat
performance
last
year.
Asia’s
emerging
market
economies
remain
the
main
engine
for
the
global
economy.
Growth
in
India
and
China
is
revised
upwards
and
accounts
for
almost
half
of
global
growth.
Yet
prospects
for
the
next
five
years
remain
weak,
largely
because
of
waning
momentum
in
emerging
Asia.
By
2029,
growth
in
China
is
projected
to
moderate
to
3.3
percent,
well
below
its
current
pace.
As
in
April,
we
project
global
inflation
will
slow
to
5.9
percent
this
year
from
6.7
percent
last
year,
broadly
on
track
for
a
soft
landing.
But
in
some
advanced
economies,
especially
the
United
States,
progress
on
disinflation
has
slowed,
and
risks
are
to
the
upside.
In
our latest
WEO
update,
we
find
that
risks
remain
broadly
balanced,
but
two
downside
near-term
risks
have
become
more
prominent.
First,
further
challenges
to
disinflation
in
advanced
economies
could
force
central
banks,
including
the
Federal
Reserve,
to
keep
borrowing
costs
higher
for even longer.
That
would
put
overall
growth
at
risk,
with
increased
upward
pressure
on
the
dollar
and harmful
spillovers to
emerging
and
developing
economies.
Mounting
empirical
evidence,
including some
of
our
own,
points
to
the
importance
of
global
‘headline’
inflation
shocks—mostly
energy
and
food
prices—in
driving
the
inflation
surge
and
subsequent
decline
across
a
broad
range
of
countries.
The
good
news
is
that,
as
headline
shocks
receded,
inflation
came
down
without
a
recession.
The
bad
news
is
that
energy
and
food
price
inflation
are
now
almost
back
to
prepandemic
levels
in
many
countries,
while
overall
inflation
is
not.
One
reason,
as
I emphasized
previously,
is
that
goods
prices
remain
high
relative
to
services,
a
legacy
of
the
pandemic
initially
boosting
goods
demand
while
restricting
their
supply.
This
makes
services
comparatively
cheaper,
increasing
their
relative
demand—and,
by
extension,
that
of
the
labor
needed
to
produce
them.
This
is
putting
upward
pressure
on
services
prices
and
wages.
Indeed,
services
prices
and
wage
inflation
are
the
two
main
areas
of
concern
when
it
comes
to
the
disinflation
path,
and
real
wages
are
now
close
to
prepandemic
levels
in
many
countries.
Unless
goods
inflation
declines
further,
rising
services
prices
and
wages
may
keep
overall
inflation
higher
than
desired.
Even
absent
further
shocks,
this
is
a
significant
risk
to
the
soft-landing
scenario.
Second,
fiscal
challenges
need
to
be
tackled
more
directly.
The
deterioration
in
public
finances
has
left
many
countries
more
vulnerable
than
foreseen
before
the
pandemic.
Gradually
and
credibly
rebuilding
buffers,
while
still
protecting
the
most
vulnerable,
is
a
critical
priority.
Doing
so
will
free
resources
to
address
emerging
spending
needs
such
as
the
climate
transition
or
national
and
energy
security.
More
importantly,
stronger
buffers
provide
the
fiscal
resources
needed
to
address
unexpected
shocks.
However,
too
little
is
being
done,
magnifying
economic
policy
uncertainty.
Projected
fiscal
consolidations
are
largely
insufficient
in
too
many
countries.
It
is
concerning
that
a
country
like
the
United
States,
at
full
employment,
maintains
a
fiscal
stance
that
pushes
its
debt-to-GDP
ratio
steadily
higher,
with
risks
to
both
the
domestic
and
global
economy.
The
increasing
US
reliance
on
short-term
funding
is
also
worrisome.
With
higher
debt,
slower
growth,
and
larger
deficits,
it
would
not
take
much
for
debt
trajectories
to
become
much
less
comfortable
in
many
places,
especially
if
markets
send
government
bond
spreads
higher,
with risks
for
financial
stability.
Unfortunately,
economic
policy
uncertainty
extends
beyond
fiscal
considerations.
The
gradual
dismantling
of
our
multilateral
trading
system
is
another
key
concern.
More
countries
are
now
going
their
own
way,
imposing
unilateral
tariffs
or industrial
policy
measures whose
compliance
with
World
Trade
Organization
rules
is
questionable
at
best.
Our
imperfect
trading
system
could
be
improved,
but
this
surge
in
unilateral
measures
isn’t
likely
to
deliver
lasting
and
shared
global
prosperity.
If
anything,
it
will
distort
trade
and
resource
allocation,
spur
retaliation,
weaken
growth,
diminish
living
standards,
and
make
it
harder
to
coordinate
policies
that
address
global
challenges,
such
as
the
climate
transition.
Instead,
we
should
focus
on
sustainably
improving
medium-term
growth
prospects
through
more
efficient
allocation
of
resources
within
and
across
countries,
better
education
opportunities
and
equality
of
chances,
faster
and
greener
innovation
and
stronger
policy
frameworks.
Macroeconomic
forces—desired
national
savings
and
domestic
investment
together
with
global
rates
of
return
on
capital—are
the
primary
determinants
of
external
balances.
Should
these
imbalances
be
excessive,
trade
restrictions
would
be
both
costly
and
ineffective
at
addressing
the
underlying macroeconomic
causes.
Trade
instruments
have
their
place
in
the
policy
arsenal,
but
because
international
trade
is
not
a
zero-sum
game,
they
should
always
be
used
sparingly,
within
a
multilateral
framework,
and
to
correct
well-identified
distortions.
Unfortunately,
we
find
ourselves
increasingly
at
a
remove
from
these
basic
principles.
As
the
eight
decades
since
Bretton
Woods
have
shown,
constructive
multilateral
cooperation
remains
the
only
way
to
ensure
a
safe
and
prosperous
economy
for
all.