WASHINGTON, DC—In its latest World Economic Outlook for the remainder of 2024 and 2025, the International Monetary Fund (IMF) confirmed that global inflation is expected to decline to its lowest levels since 2022 by the end of this year.
During a press conference today (Oct. 22), IMF Director of Research Pierre-Olivier Gourinchas revealed that after peaking at 9.4 percent year-on-year in the third quarter of 2022, the Fund projects headline inflation will drop to 3.5 percent by the end of 2025, with many figures nearing central bank targets.
“Now, inflation came down while the global economy remained resilient,” Gourinchas told reporters.
This development is welcome news for the people of St. Kitts and Nevis, where much of the country's commodities, including food, are imported, contributing to sharp price increases in recent years. Prime Minister Terrance Drew previously urged residents to consume more locally produced foods to reduce their dependence on imported goods, as inflation was largely driven by external factors.
With inflation trending downward, global economic growth is forecast to remain steady at 3.2 percent in both 2024 and 2025. While the U.S. economy is expected to slow, other advanced economies are projected to rebound.
Gourinchas noted that economic growth in Asia remains robust, despite a slight downward revision of China’s growth forecast to 4.8 percent for 2024. “Low?income countries have seen their growth revised downwards, some of it because of conflicts and climate shocks,”he added.
“Now, the decline in inflation without a global recession is a major achievement. Much of that disinflation can be attributed to the unwinding of the unique combination of supply and demand shocks that caused the inflation in the first place, together with improvements in labor supply due to immigration in many advanced countries. But monetary policy played a decisive role, keeping inflation expectations anchored,” he explained.
Despite the positive news, Gourinchas cautioned that several downside risks could disrupt the recent improvements. Among these risks are the potential escalation of regional conflicts, particularly in the Middle East, which could destabilize commodity markets.
“Policy shifts toward restrictive trade and industrial policies could significantly reduce output. A sharp reduction in migration to advanced economies could reverse recent supply gains that have eased inflation. This, in turn, could trigger an abrupt tightening of global financial conditions, further depressing output,” Gourinchas warned. "Together, these factors could amount to a loss of about 1.6 percent of global output by 2026.”
To mitigate these risks and support sustainable growth, Gourinchas recommended a strategic shift in policy. “Policymakers now need to implement a ‘policy triple pivot’ to tackle potential fallout and strengthen the global economy,” he added.
