- Major economies are stabilising but still face ongoing challenges in 2024
- Developing and emerging economies are seeing steady growth and forecasted to outperform major counterparts
- Inflation rates in the US and Eurozone on track to return to target 2% levels
- Renewed price pressures highlight ongoing risk of global inflation
LONDON, UK – The Global Economy is recovering but still faces on-going challenges in 2024, according to a Euromonitor expert.
Lan Ha, Head of Economic Research at Euromonitor International, said global short-term economic prospects continue to improve private sector confidence.
Global real GDP growth is expected to reach 2.9% in 2024, slightly down from 3.1% in 2023 and remaining below the pre-pandemic levels. The slowdown is primarily due to the lagging effect of high interest rates and ongoing high costs for businesses and consumers but risk remains high amid rising geopolitical tensions.
Ha said: “I expect economic conditions to gradually normalise with further easing of inflation and loosening monetary policy later in 2024. This will support a steady growth momentum that will carry into 2025, when global growth is projected to reach 3.1%.”
Financial hurdles lie ahead for world’s major economies
The US economy continues to defy expectations and showed resilience in the first quarter of 2024, leading to a further upgrade in real GDP growth forecast to 2.1% in 2024, added Ha.
“Ongoing challenges, including elevated interest rates, persistent inflation and high consumer debts will weigh on consumer spending and growth in the US. In the Eurozone, real GDP growth is expected to remain low at 0.7% in 2024 before it increases to 1.5% in 2025 amid easing inflation and expected rate cuts.”
The speed of economic growth varies in Europe with some southern countries outperforming their northern counterparts. Due to a sustained rebound of tourism and lower exposure to the manufacturing downturn, economies in Spain, Portugal and Greece look set to witness real GDP growth rates higher than the regional average and the growth speed in Germany and France in 2024.
“Growth forecast for China is revised upward to 4.7% in 2024 on the back of stronger investments but a lingering real estate crisis and subdued private consumption will continue to restrain economic expansion in the world’s second largest economy,” said Ha.
Emerging and developing economies set to outperform advanced counterparts
Emerging and developing economies are expected to outperform advanced economies, with 2024 real GDP growth estimated at 4.0% compared to 1.4% in advanced economies, explained Ha.
“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 subdued in some Latin American major emerging markets including Mexico and Brazil, on the back of softening domestic and external demands, fiscal consolidation and tight monetary policy.”
Global inflation slows but price pressures point to a bumpy path ahead
Ha explained that global inflation will continue to fall in 2024 as tight monetary policy 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.
“With the ongoing and renewed headwinds, the global disinflation process is expected to be slower in 2024 than in the previous year, facing a bumpy road moving towards the central banks’ target levels. In the US, inflation rose in the first quarter of 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 conflict in the Middle East.”
Geopolitical tensions threaten double whammy by raising global inflation and slowing growth
Ha said despite improved growth prospects, the global economic outlook in 2024-2025 is still subject to various downturn risks. Geopolitical tensions remain the primary upside risk to global inflation and downside risk to economic growth in Q2 2024 and beyond. The rise in oil prices in March-April 2024 posed a threat to a resurgence of consumer prices 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.
For more insights on the global economic outlook see our Global Economic Outlook Q2 2024 report. You can get an in-depth look at the impacts of different macroeconomic scenarios in our full report, Global Economic Forecast.
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