Global Economic Outlook: Resilient Growth Amid Geopolitical and Inflationary Challenges

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Executive Extended Summary

Global Economic Outlook: Promising Growth Despite Headwinds

2024 Economic Projections and Geopolitical Landscape

  • Global real GDP growth is forecasted at 2.5% in 2024, matching the growth rate of 2023. This reflects an unexpected resilience despite challenges such as high interest rates and ongoing geopolitical tensions.
  • The upward revision in growth projections is driven by increased expectations for the US, now anticipated to grow by 2.2%. European economies are expected to achieve a growth rate of 1%, and Brazil’s growth forecast has been adjusted to 2.1%.

Monetary Policy Adjustments:

  • Expectations for monetary policy easing have been scaled back. The US Federal Reserve and the European Central Bank are projected to make fewer cuts than previously anticipated. Conversely, the Bank of England is expected to reduce its rates more rapidly, bringing them down to 3.5% by the end of 2025.
  • The US dollar is forecasted to appreciate for a third consecutive year in 2024. This shift from earlier expectations of mild depreciation is influenced by a sharper depreciation in the yen and the absence of expected euro appreciation.

Geopolitical Tensions and Economic Fragmentation:

  • The global geopolitical environment is increasingly marked by competition and conflict. Tensions between Israel and Iran, ongoing conflicts like Russia’s invasion of Ukraine, and flashpoints in the South China Sea and Taiwan contribute to this heightened risk.
  • Economic fragmentation and regionalisation are expected to increase from 2024 to 2028 as nations tighten alliances and form competing blocs. Industrial policies, including sanctions and new incentives, will lead to more inefficient supply chains and heightened trade tensions, ultimately restraining growth potential. Global real GDP growth is anticipated to average 2.8% annually over the next five years, a slight decline from the 3% average of the 2010s.

Geopolitical risk will keep a floor under oil prices in 2024-25

– Dated Brent Blend; US$/barrel

Rising global weight of emerging economies will strain geopolitics

Nominal GDP; US$ trn

Inflation and Monetary Policy- Persistent Inflation:

  • Inflation is projected to remain above pre-pandemic levels, driven by tight labour markets, demographic changes, and reconfigured supply chains. Developed markets are expected to see inflation averaging 2.6% in 2024.
  • Geopolitical risks could lead to renewed price hikes, particularly affecting lower-income economies. A major confrontation, such as a war in the Middle East, would exacerbate these pressures.

Monetary Policy Trajectories:

  • The Federal Reserve is expected to delay its first interest rate cut until September 2024, while the European Central Bank and Bank of England are anticipated to act sooner, starting in June. The Bank of Japan is projected to gradually exit its negative policy rate.
  • High government bond yields will constrain fiscal expansion, with governments becoming more reluctant to borrow. Consequently, debt-servicing costs will absorb larger portions of budgets. Despite this, spending on defense, healthcare, and industrial policy is likely to remain protected.

Long-term Economic Trends – Impact of Climate Change and AI:

  • The transition to green energy and technological advancements, particularly in artificial intelligence (AI), will significantly shape global economic prospects over the next five years. Developing economies are expected to struggle disproportionately with climate change and securing necessary financing.
  • Productivity gains from AI are expected to benefit primarily developed economies, presenting challenges for developing countries aiming to move up the value chain in manufacturing and services. Nonetheless, some emerging markets, such as India and Mexico, are expected to stand out. India is forecasted to grow the fastest among major economies from 2024 to 2028, while Mexico will benefit from nearshoring trends.

Limited monetary policy loosening will begin around mid-2024

The Fed will delay its first rate cut until September 2024 – Policy interest rate, %; end-period

Global Divergence and Political Implications:

  • Economic divergence will increasingly influence political attitudes, particularly towards immigration in North America and Europe. Stricter immigration policies will likely emerge as economic conditions in many parts of the world drive more individuals to seek opportunities elsewhere.
  • The 2024 US election is expected to deepen political and cultural divisions, with significant policy shifts possible depending on the outcome. Authoritarian regimes globally will face challenges, ranging from climate change to terrorism, impacting governance stability.

Resilient global growth in 2024 as US economy outperforms Change in real GDP, 2024; %

Comprehensive Country Analysis

Detailed country analysis provides essential insights into political, economic, and market-moving topics. This service includes:

  • Global and regional outlooks on politics, economics, and significant market trends.
  • Daily insights into developments affecting future outlooks.
  • Executive summaries of medium-term country forecasts covering political and economic landscapes for approximately 200 countries.
  • Long-term forecasts on structural trends shaping around 80 major economies.
  • Industry analysis for 26 sectors across approximately 70 markets.
  • Commodity forecasts covering supply, demand, and prices of 25 critical goods.
  • Extensive macroeconomic and industry data, including historical trends and future forecasts.
  • Proprietary ratings on the business environment.
  • Thematic analysis on key issues expected to shape the global outlook.

This analysis helps organizations plan and operate effectively, providing expansive coverage, robust data, and non-biased, rigorously researched forecasts. The service aims to challenge consensus and offer nuanced insights into politics, policy, and the economy.

For More Information:

If you would like more specific information about our Market Analysis service or details from other countries and continents, please contact [email protected].

The information in this summary has been gathered from multiple sources, including:

  • Global real GDP growth and projections.
  • Analysis of monetary policy adjustments.
  • Geopolitical tensions and economic fragmentation.
  • Inflation trends and forecasts.
  • Long-term economic trends, including the impact of climate change and AI.
  • Comprehensive country analysis.

© 2024. All rights reserved. Reproduction and transmission @Borderless Consulting

“The global economic outlook for 2024 shows surprising resilience with a forecasted real GDP growth of 2.5%, matching the growth rate of 2023 despite high interest rates and geopolitical challenges. This strength is driven by an upward revision in the US growth forecast to 2.2%, alongside positive adjustments for several European economies and Brazil. However, geopolitical tensions, such as conflicts in the Middle East and Russia’s invasion of Ukraine, continue to pose risks.

Inflation remains a concern, projected to settle at higher levels than pre-pandemic trends due to tight labor markets, demographic shifts, and supply chain reconfigurations. Monetary policy will see limited loosening, with the US Federal Reserve delaying rate cuts until September 2024, while the European Central Bank and Bank of England are expected to act earlier.

Over the next five years, the global economy will face challenges from climate change and AI, which are likely to widen the gap between developed and developing economies. Despite these headwinds, countries like India and Mexico are poised for robust growth, driven by strong domestic factors and favorable global trends.

For comprehensive insights and detailed country-specific analysis, our service offers extensive coverage and data-driven forecasts, enabling organizations to navigate the complexities of the global economic landscape effectively.”

For more specific information or details from other countries and continents, please contact [email protected].

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President & CEO
Borderless Consulting

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President & CEO
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