Washington, Jan 17 (AP) The International Monetary Fund expects the world economy to grow a little faster and inflation to keep falling this year.

But it warned that the outlook is clouded by President-elect Donald Trump's promises to slash US taxes, impose tariffs on foreign goods, ease regulations on businesses and deport millions of immigrants working illegally in the United States.

The Washington-based lending agency expects the world economy to grow 3.3 per cent this year and next, up from 3.2 per cent in 2024. The growth is steady but unimpressive: From 2000 to 2019, the world economy grew faster – an average of 3.7 per cent a year. The sluggish growth reflects the lingering effects of big global shocks, including the COVID-19 pandemic and Russia's invasion of Ukraine.

The IMF is a 191-nation lending organisation that works to promote economic growth and financial stability and to reduce global poverty.

Global inflation, which had surged after the COVID-19 pandemic disrupted global supply chains and caused shortages and higher prices, is forecast to fall from 5.7 per cent in 2024 to 4.2 per cent this year and 3.5 per cent in 2026.

But in a blog post that accompanied the release of the IMF's latest World Economic Outlook report, the fund's chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.'' Big tax cuts could overheat the US economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.

Gourinchas also wrote that Trump's plans to slash regulations on business could “boost potential growth in the medium term if they remove red tape and stimulate innovation.'' But he warned that “excessive deregulation could also weaken financial safeguards and increase financial vulnerabilities, putting the US economy on a dangerous boom-bust path.'' Trump inherits a strong US economy. The IMF expects US growth to come in at 2.7 per cent this year, a hefty half percentage point upgrade from the 2.2 per cent it had forecast in October.

The American economy — the world's biggest — is proving resilient in the face of high interest rates, engineered by the Federal Reserve to fight inflation. The US is benefiting from a strong job market that gives consumers the confidence and financial wherewithal to keep spending, from strong gains in productivity and from an influx of immigrants that has eased labour shortages.

The US economy's unexpectedly strong performance stands in sharp contrast to the advanced economies across the Atlantic Ocean.

The IMF expects the 20 countries that share the euro currency to collectively grow just 1 per cent this year, up from 0.8 per cent in 2024 but down from the 1.2 per cent it was expecting in October. “Headwinds,” Gourinchas wrote, “include weak momentum, especially in manufacturing, low consumer confidence, and the persistence of a negative energy price shock'' caused by Russia's invasion of Ukraine.

The Chinese economy, No. 2 in the world, is forecast to decelerate – from 4.8 per cent last year to 4.6 per cent in 2025 and 4.5 per cent in 2026. A collapse in the Chinese housing market has undermined consumer confidence.

If government doesn't do enough to stimulate the economy with lower interest rates, stepped-up spending or tax cuts, China “is at risk of a debt-deflation stagnation trap,'' Gourinchas warned, in which falling prices discourage consumers from spending (because they have an incentive to wait to get still better bargains) and make it more expensive for borrowers to repay loans.

The IMF forecasts came out a day after its sister agency, the World Bank, predicted global growth of 2.7 per cent in 2025 and 2026, same as last year and 2023.

The bank, which makes loans and grants to poor countries, warned that the growth wasn't sufficient to reduce poverty in low-income countries. The IMF's global growth estimates tend to be higher than the World Bank's because they give more weight to faster-growing developing countries. (AP) GRS GRS GRS

Trade Policy shifts: tariffs and tax cuts may raise inflation and deepen global economic uncertainty. The IMF projects modestly stronger global growth and falling inflation but warns that proposed US tax cuts, tariffs, mass deportations and deregulation could raise near term inflation, worsen labour shortages, hurt exporters and increase financial vulnerabilities; U.S. fundamentals remain strong while the euro area and China face distinct downside risks that could amplify global uncertainty.