Al-Shall suggests weak economic growth is likely to persist

Al-Shall’s weekly economic report delves into the International Monetary Fund’s (IMF) outlook outlined in its January 30 report regarding the potential performance of the global economy in 2024 and 2025.

The IMF projections, more optimistic than those of the World Bank issued on January 9, anticipate global economic growth at approximately 3.1 percent for the current year and 3.2 percent for 2025, reports Al-Jarida daily.

In contrast, the World Bank foresees growth rates of 2.7 percent for the current year and a lower 2.4 percent for 2025, reflecting a -0.4 percent and -0.8 percent variance for the two consecutive years.

Comparatively, the IMF forecasts are also more positive than those of the Economist Intelligence Unit (EIU) in a January 1 report, which predicts global economic growth at around 2.3 percent for the current year and 2.6 percent for 2025.

While all three reports align on a cautious decline in the global economy over the two years with sustained albeit modest growth, discrepancies in estimates arise due to heightened uncertainty, suggesting ongoing adjustments to expectations in subsequent reports.

Al-Shall highlighted the IMF’s rationale for revising its economic growth forecast by approximately 0.2 percent from its October report, citing the better-than-expected performance of the US economy, expansions in Chinese financial policy, and progress in controlling inflation in major emerging and developing economies. Despite these positive factors, the projected growth figures for 2024 and 2025 remain below the 3.8 percent growth rate achieved during the 2000-2019 period, including the global financial crisis of 2008.

The report emphasized that short-term challenges include maintaining inflation within target limits, necessitating the restructuring of monetary policies to achieve critical objectives. The subsequent challenge lies in restructuring financial policies proactively to cope with potential crises, necessitating an ongoing effort to prepare monetary and public financial policies for the future.

While the IMF report expresses optimism, it agrees with other reports that the global economy’s weak performance stems from potential weaknesses in the largest economies. The American economy, constituting 25.8 percent of the global economy, is expected to grow at rates of 2.1 percent and 1.7 percent for 2024 and 2025, respectively.

China, representing 17.0 percent of the global economy, is projected to grow at approximately 4.6 percent and 4.1 percent for the same years. Germany, the third-largest economy, is an exception with expected growth of 0.5 percent and 1.6 percent for 2024 and 2025, respectively.

However, it faced contraction in 2023, with negative growth around -0.3 percent. Japan, the fourth-largest economy, anticipates weak growth of 0.9 percent in 2024 and 0.8 percent in 2025. India, the fifth-largest economy, projects lower growth rates of 6.5 percent for both 2024 and 2025 compared to its 2023 growth level of 6.7 percent.

In conclusion, Al-Shall suggests that weak economic growth is likely to persist, particularly affecting economies with high energy consumption. The IMF advises such countries to focus on reestablishing the targets of their monetary and financial policies, a recommendation that applies to Kuwait.

Specifically, the report raises concerns about the sustainability of Kuwait’s public finances due to potential repercussions on financial revenues resulting from weak demand for energy. It underscores the importance of effective financial policies during both prosperous and challenging times.

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