The global economic outlook continues to recover, as easing inflation, improved supply conditions and strong labour markets in advanced economies support real income gains, consumer spending and other economic activities in the first quarter of 2024. Nevertheless, growth is expected to remain below pre-pandemic levels, while numerous headwinds continue to make the outlook uncertain. These include the renewed inflationary pressures amid widening geopolitical tensions and the risk of a prolonged period of monetary policy tightening.
In Euromonitor International’s Q2 2024 baseline forecast, global real GDP growth is expected to reach 2.9% in 2024 (0.2 percentage points higher than in the Q1 2024 estimation) and 3.1% in 2025. Global inflation is forecast to ease to 6.4% in 2024, before dropping further to 3.7% in 2025.
Economic resilience continues among advanced countries, though slowdown is still expected
Economic growth in mature economies continued to benefit from a resilience in the labour market and consumer spending, although still pointing to an overall slowdown in 2024 against the backdrop of still-tightened financial conditions.
In the Q2 2024 baseline forecast, real GDP growth projections for advanced economies were revised upwards to 1.4% in 2024 and 1.7% in 2025
Source: Euromonitor International’s Q2 2024 baseline forecast
The upwards revision is mainly due to the considerably improved outlook for the US economy in 2024, as it entered the year on a strong footing. The US economy has maintained a positive growth momentum in the first quarter of 2024, leading to a further upgrade in its real GDP growth forecast to 2.1% over the year, while 2025’s forecast remained unchanged at 1.7%. A largely persistent labour market strength continues to support consumer income and spending growth in the US, partly offsetting the dampening effect of a monetary policy that remains tight. Nevertheless, ongoing challenges, including elevated interest rates, renewed inflationary pressures and high consumer debts, are expected to cause a slowdown in jobs, consumer spending and thus overall growth in the coming months.
In the eurozone, real GDP growth is expected to remain stagnant at 0.7% in 2024, before it increases to 1.5% in 2025 amid easing inflation and expected rate cuts. Economic recovery in the region’s key economies continues to be constrained by elevated interest rates and weak external demand that hinders exports of manufactured goods. The speed of economic growth, however, diverges among the bloc, with some southern European countries outperforming their northern counterparts. Due to a sustained rebound of tourism and lower exposure to the manufacturing downturn, the economies of Spain, Portugal and Greece would witness real GDP growth rates higher than the regional average and the growth speed in Germany and France in 2024.
Emerging economies to see steadier growth, with some regional divergence
Emerging and developing economies are forecast to grow at a notably faster pace compared to advanced countries, with 4.0% in 2024 and 4.1% in 2025. Emerging Asian countries such as India, Indonesia, Vietnam and the Philippines are expected to witness some of the fastest growth rates globally, reflecting their continuing strength in domestic consumption and in attracting investments.
Growth will remain relatively subdued in some major emerging Latin American markets, including Mexico and Brazil, on the back of softening domestic and external demands, fiscal consolidation and a monetary policy that remains tight
Source: Euromonitor International’s Q2 2024 baseline forecast
Growth forecast for China in this quarter was again revised upward to 4.7% in 2024 (4.5% in Q1 2024), given the stronger investment and manufacturing activities seen in the first quarter of 2024, especially in the production of hi-tech goods. China’s official Manufacturing Purchasing Managers Index (PMI) surged to 50.8 in March 2024, marking the first expansion in factory activity in six months and the sharpest pace in a year. However, a lingering real estate crisis and subdued private consumption will continue to restrain economic expansion in the world’s second largest economy.
Global disinflation trend to continue, but renewed price pressures point to a more bumpy path
Global inflation will continue to recede in 2024, as tight monetary policy further slows demand, and supply conditions improve. In Euromonitor International’s Q2 2024 baseline forecasts, global consumer price inflation is expected to ease to 6.4% in 2024, before seeing a major drop to 3.7% in 2025. Excluding Argentina (where hyperinflation is expected to accelerate remarkably in 2024), global inflation would be at 4.5% in 2024 and 3.0% in 2025.
Given the ongoing and renewed headwinds, however, the global disinflation process is expected to be slower in 2024 than in the previous year, while facing a bumpy road moving towards the central banks’ target levels. In the US, inflation saw an uptick in Q1 2024 due to a persistent tight labour market and robust consumer demand, particularly for services. In some emerging and developing countries, a strong US dollar is adding pressures to the cost of energy, food and other imported commodities. Global energy prices also faced renewed upward pressures in April 2024, as geopolitical tensions around the Israel-Hamas war widened.
Geopolitical tensions represent a key upside risk to global inflation and downside risk to growth
Despite improved growth prospects, the global economic outlook in 2024-2025 is still subject to various downside risks. Geopolitical tensions remain the primary upside risk to global inflation and thus downside risk to economic growth in Q2 2024 and beyond. In fact, the rise in oil prices in March-April 2024 posed a threat to a resurgence of consumer prices, while emphasising the role of commodities as a key driver of global inflation.
Euromonitor International’s Commodity Price Hike scenario simulates a situation where the global economy sees permanently rising global commodity prices, including prices for energy, food and metals. Under this circumstance, global real GDP growth would slow to 2.5% in both 2024 and 2025. At the same time, global inflation would resurge to 8.0% in 2024 and 5.1% in 2025.
Widening global geopolitical tensions could also lead to a deeper fragmentation of the global economy, with negative spillover impacts on growth, as reflected by the Global Fragmentation scenario. Other downside risks to global outlook include a deeper economic slowdown in China, as well as in the eurozone. On the upside, the global economy could see a stronger bounce-back on falling commodity prices and increased stimulus spending, while faster-than-expected growth in India would also give a marginal boost to global growth.
The persistent uncertainties in the global economy require businesses to closely monitor risks, plan for “what-if” scenarios and stay ahead of the curve. Learn more about the global economic outlook in Q2 2024 and the impacts of different macroeconomic scenarios in our full report “Global Economic Forecasts: Q2 2024”.