The headlines blared warnings for months, but according to the International Monetary Fund (IMF), we can breathe a little easier. The risk of a global recession in 2024 appears “fairly minimal,” thanks to a robust US economy, strong performances in emerging markets, and a quicker-than-expected decline in inflation.

This positive outlook comes from the IMF’s latest World Economic Outlook report. The Washington D.C.-based institution nudged its global growth forecast slightly upwards, predicting a 3.2% expansion in both 2024 and 2025.

“There has been tremendous resilience in terms of growth prospects,” said Pierre-Olivier Gourinchas, Economic Counsellor and Director of the Research Department at the IMF. He pointed to the US economic strength and the positive performance of several emerging markets as key factors contributing to this optimism. Additionally, inflation, a major concern for consumers worldwide, has been falling faster than anticipated.

The report does highlight some regional variations. While the US and emerging markets shine, Europe presents a more mixed picture. The IMF downgraded growth forecasts for Germany, France, and Italy, citing weaker economic performance. However, there’s a silver lining: Spain, Portugal, Belgium, and the UK all received upward revisions in their growth projections.

The IMF’s optimism is tempered by a significant concern: geopolitical instability, particularly in the Middle East. Tensions in this region pose a major risk to the global economy, especially through their impact on oil prices.

A significant and sustained rise in oil prices throughout 2024 could fuel inflation and force central banks to keep interest rates higher for longer. This, in turn, could dampen global economic growth. The IMF estimates that a consistent 15% increase in oil prices could push global inflation up by 0.7%.

While oil prices have remained relatively stable despite recent spikes in tensions between Israel and Iran, the IMF’s Deputy Managing Director, Gita Gopinath, warns against complacency. “A big concern” is how a potential escalation in the Middle East could significantly impact oil prices, she cautioned.

While the IMF’s latest report offers a more optimistic outlook on the global economy, the threat of geopolitical instability, particularly in the Middle East, cannot be ignored. Continued monitoring of this situation is crucial to ensure a smooth economic path forward.