IMF cuts Japan’s 2024 growth estimate to 0.3%, India will overtake much before 2030

The International Monetary Fund on Tuesday slashed its 2024 growth forecast for Japan to 0.3 percent, down 0.4 percentage point from its estimate three months ago, citing negative developments such as temporary auto supply disruptions.

The latest estimate in the IMF’s World Economic Outlook report is the lowest since 2020, when the Japanese economy contracted sharply in the wake of the COVID-19 pandemic.

At this rate of growth, Indian GDP is like to overtake Japan much before 2030 to become third largest Economy even in GDP terms.

The IMF said the Japanese economy has also been affected by the “fading of one-off factors,” including a sharp rise in tourism that drove growth in 2023, in addition to the supply chain shortages that widened earlier this year following a safety scandal involving a Toyota Motor Corp. subsidiary.

Japan took a relatively big growth cut among major economies at a time when the country is in the midst of a general election campaign in which a major issue is how to prop up its weak economy.

However, the IMF said Japan’s growth will accelerate to 1.1 percent in 2025, up 0.1 point from its July forecast, on the back of wage and consumption increases.

The IMF made almost no changes to its global growth outlook and projections for other major economies. It anticipated 3.2 percent worldwide economic expansion this year, unchanged from three months ago, and also 3.2 percent in 2025, down 0.1 point.

The quarterly report came out two weeks before the U.S. presidential election, with the Republican nominee, Donald Trump, promising to impose steep import tariffs, and as finance chiefs from around the world are now gathering for the biannual meetings of the IMF and the World Bank in Washington.

Shortly after the document was released, IMF chief economist Pierre-Olivier Gourinchas said at a press conference that “the battle against inflation is almost won,” but warned that “risks are now tilted to the downside.

“Gourinchas said such challenges include many countries favoring trade policies aimed at protecting workers and industries at home.

“These measures can sometimes boost investment and activity in the short run, but they often lead to retaliation and ultimately fail to deliver sustained improvements in standards of living,” he said.

“They should be avoided when not carefully addressing well-identified market failures or narrowly defined national security concerns.

“While the report said only minimal revisions have been made to the global forecast, a closer look reveals that the broadly flat trend is due to offsetting factors in developing economies.

Because of conflicts and civil unrest, the IMF said production cuts have been seen in regions such as the Middle East and sub-Saharan Africa, while emerging Asian countries have been growing steadily, thanks to surging demand for semiconductors and electronics.

Despite ongoing geopolitical tensions, the report said global trade volume as a share of world growth has not fallen markedly. But it noted that “signs of geo economic fragmentation have started to emerge, with increasingly more trade occurring within geopolitical blocs rather than between them.

“For 2024, the U.S. growth forecast was revised upward by 0.2 point to 2.8 percent, backed by brisk consumer spending and capital investment.

Growth was projected to slow to 2.2 percent in 2025, though the figure was 0.3 point higher than in the July forecast.

The IMF lowered this year’s estimate for China to 4.8 percent, compared with the previous projection of 5.0 percent, amid continued weakness in consumer confidence and the real estate sector.

The growth estimate for next year was unchanged at 4.5 percent.

The Washington-headquartered organization said growth in the euro area was also revised lower, with 0.8 percent likely, down 0.1 point, partly due to a slowdown in Germany’s manufacturing sector.

For 2025, it was projected to be at 1.2 percent, down 0.3 point.