The global economy will slow down this year compared with 2023, but its growth is expected to pick up again in 2025, according to a recent report from Euromonitor International, a business intelligence and market research company.
That prediction comes with the caveat that the world economy outperformed expectations in 2023, as the U.S. economy and consumer spending in some advanced markets were “remarkably resilient,” said Lan Ha, Euromonitor global head of economies, in a short video that introduces the “Global Economic Forecasts 2024 Outlook” report.
For 2024, even if recessions are avoided, businesses will continue to face a volatile economic environment, she adds. Cooling inflation will be good news, but high interest rates will pose significant financial pressures on consumers and businesses, Ha says.
“The future is not certain due to existing economic and geopolitical risks,” she says, adding that “building resilience will be a key business trend.”
Bright spots in 2024 will include emerging economies, particularly in the Asia-Pacific region, and they will be the primary source of global growth fueled by rising consumption and investment, she also says.
The gross domestic product (GDP) in advanced economies will be 1.3%, which will be a decrease from 1.5% in 2023. Emerging economies, meanwhile, might see a stable GDP rate of 3.9%, Ha notes in an email on January 30, 2024, while updating some of the data published in the original report.
“Asia Pacific continues to drive global economic prospects despite challenges in China,” according to the report. “India is expected to be the fastest-growing major economy in 2024 at 6.1%.”
Vietnam, the Philippines, and Indonesia are also contributing to strong regional performance, with each growing about 5% in 2024, the report adds.
The report suggests that global inflation will moderate this year due to high interest rates and tighter credit conditions, with inflation declining faster in advanced economies. Developing markets, on the other hand, will “have a higher vulnerability to commodity price shocks.”
“Businesses need to be aware of the numerous drivers that impact inflation rates in the year ahead, especially on the supply side,” according to the report. “The global economy faces several geopolitical events, including the Israel-Hamas war, with potentially major implications for commodity markets. Should these escalate, impacting energy and food supply, the risk of a global inflation resurgence rises considerably.”
Four Top Risks
Geopolitical tensions and inflation are among the four top risks cited in the report, with the others being tight monetary policy and challenges playing out in China.
China’s growing real estate crisis “could cause significant damage to the global economy,” the report says. Its economic growth in 2024 is expected to slow to 4.7% from 5% in 2023.
“The long-lasting property crisis, intensifying trade tensions, subdued global demand, swelling public debt, and record-high unemployment are primary challenges that hinder performance,” the report says, adding that the situation could change if China takes steps to foster growth such as facilitating better international ties.
On January 29, 2024, The Wall Street Journal reported that Evergrande, which was once China’s largest property developer, was ordered to liquidate while having about $300 billion in liabilities.
Monetary Policy and Interest Rates
In the U.S., many observers have been hoping that interest rates will start being cut. But that isn’t guaranteed, according to a January 17, 2024, article in the Journal titled “Markets Expect Rate Cuts Soon. Central Banks Say Not So Fast.”
The Euromonitor report also cautions that interest rate cuts might not happen in the U.S. or Europe.
“Restrictive monetary policy in the U.S. and the Eurozone could result in sharper-than-expected economic slowdowns with global implications,” according to the report. “Further interest rate hikes have not been ruled out despite noticeably slowing growth momentum.”
Thomas A. Barstow is senior editor of FlexPack VOICE®.