Global Economic Outlook September 2024:
Despite the ongoing
uncertainties
in the global economic landscape, recovery and resilience continue to be the driving forces behind the
macroeconomic outlook
in September 202The global
Gross Domestic Product
(GDP) is projected to grow at a moderate pace, with the
advanced economies
expected to lead the recovery. The rebound in consumer spending, fueled by
vaccination campaigns
and fiscal stimuli, will be a significant driver for the
global recovery
. The
services sector
is anticipated to recover more robustly, with the manufacturing sector continuing to lag behind.
Inflation
is expected to remain subdued, despite the ongoing recovery, with
global supply chain disruptions
and
geopolitical tensions
keeping a lid on price pressures. Central banks, including the Federal Reserve, the
European Central Bank
, and the
People’s Bank of China
, are likely to maintain their accommodative monetary policies, given the slow pace of recovery.
Emerging Markets and Developing Economies (EMDEs)
are projected to underperform, with ongoing challenges posed by the
pandemic
and
debt sustainability issues
. The vulnerabilities of EMDEs will continue to be monitored closely, with the
International Monetary Fund
(IMF) and other multilateral institutions providing support where necessary.
Trade
is expected to continue its rebound, with the
global economy
gradually returning to its pre-pandemic levels. The recovery in global trade will be supported by a
rebound in demand
and the ongoing
normalization of supply chains
.
I. Introduction
Since the onset of the pandemic, the global economic landscape has undergone seismic shifts, with far-reaching implications for
international trade
,
finance
, and
employment
. The World Trade Organization (WTO) reported a record 12.6% decline in global merchandise trade volume during the first half of 2020 compared to the previous year. The International Labour Organization (ILO) estimated that
154 million
fewer jobs could be available by the end of 2020 compared to the pre-pandemic trend, equivalent to
an increase in unemployment
of 4.7%. Central banks and governments worldwide have responded with unprecedented
fiscal and monetary measures
, including massive stimulus packages, rate cuts, and quantitative easing. However,
amid ongoing uncertainties
, it is crucial to assess the economic outlook and identify potential risks and opportunities.
The impact of the pandemic on international trade has been significant, as border closures, travel restrictions, and lockdowns disrupted supply chains and dampened demand. The International Monetary Fund (IMF) projected that
world trade would contract by 9.2% in 2020
, with the largest negative shock since the Great Depression. The finance sector has also faced considerable challenges, as central banks and governments injected liquidity into the market to prevent a financial crisis. Meanwhile, employment has suffered dramatically due to business closures and reduced economic activity.
Given these economic headwinds, it is imperative to closely monitor the economic outlook and potential risks and opportunities. While some sectors, such as technology, e-commerce, and renewable energy, are expected to thrive in the post-pandemic world, others may struggle to recover. Moreover, geopolitical tensions, climate change, and demographic shifts could exacerbate existing vulnerabilities and create new challenges for the global economy. By staying informed and adaptable, businesses and policymakers can mitigate risks and seize opportunities in this rapidly evolving landscape.
Global Economic Trends and Projections
Overview of global Gross Domestic Product (GDP) growth estimates for 2023 and 2024
Estimates from major international organizations
According to The World Bank and the International Monetary Fund (IMF), the global economy is projected to recover from the COVID-19 pandemic, with a moderate growth rate of around 3.2% in 2023 and 3.5% in 202These estimates are slightly lower than the pre-pandemic trend of approximately 3.5% annual growth.
Comparison of pre-pandemic and post-pandemic growth projections
Before the pandemic, the global economy was growing steadily with a robust trend, driven by strong consumer demand and business investment. However, since the outbreak of COVID-19 in 2020, the global economy contracted by an estimated 3.5%, causing significant challenges to economic recovery. The ongoing recovery is expected to be slow and uneven.
Analysis of regional economic performance
Developed economies (Europe, North America, Asia-Pacific)
a. Economic recovery and challenges
Developed economies, particularly Europe and North America, are expected to show a slow but steady recovery, with growth rates of around 2.5% in 2023 and 2.8% in 202However, challenges remain, such as rising inflation, ongoing supply chain disruptions, and uncertainty surrounding the geopolitical situation in Europe.
b. Fiscal and monetary policy implications
Central banks in developed economies, including the European Central Bank (ECB) and the Federal Reserve, are expected to maintain accommodative monetary policies to support economic recovery. Fiscal policy is also likely to remain supportive, with governments continuing to provide stimulus measures to boost growth and mitigate the impact of the pandemic on businesses and households.
Emerging and developing economies (Latin America, Africa, Middle East)
a. Vulnerabilities and risks
Emerging and developing economies face significant vulnerabilities and risks, including high levels of debt, weak health systems, and exposure to global commodity price shocks. Countries in Latin America, Africa, and the Middle East are projected to grow at a slower pace than pre-pandemic trends, with estimated growth rates of around 2.5% in 2023 and 3.5% in 2024.
b. Opportunities and growth prospects
Despite these challenges, there are opportunities for growth. For instance, the shift towards remote work and e-commerce is driving demand for digital infrastructure in these economies. Additionally, ongoing vaccination efforts and continued support from international organizations could help to mitigate the impact of the pandemic on economic recovery.
I Key Drivers of the Global Economy in 2024
Monetary policy and interest rates
Central banks will continue to play a crucial role in shaping the global economy in 202Inflation, employment, and financial stability are key considerations for their monetary policy stance. While bringing down inflation to target levels remains a priority, central banks will also need to balance the objective of maintaining low interest rates to support economic recovery. This could have significant implications for exchange rates, with potential currency depreciation or appreciation depending on central banks’ actions. Bonds markets and capital flows could also be affected, as investors adjust their portfolios in response to changing interest rate expectations.
Fiscal policy and public debt
In 2024, governments will continue to play a significant role in supporting economic recovery. Fiscal policy measures such as stimulus packages and infrastructure investments will remain important tools for spurring growth. However, governments face challenges in balancing deficits, debt sustainability, and long-term growth objectives. The implications of these decisions for interest rates, bond markets, and overall debt levels will be closely watched by financial markets.
Trade policies and globalization
Trade tensions between major economies, particularly the US and China, as well as Europe and the UK, will continue to impact the global economy in 202Trade policies could disrupt established supply chains, leading to higher prices and reduced economic efficiency. The potential for increased protectionism could also impact international cooperation, raising geoeconomic risks and uncertainties.
Technological trends and innovation
In 2024, technological trends such as digitalization, automation, and artificial intelligence will continue to shape economic growth. While these trends offer significant opportunities for productivity gains and innovation, they also present challenges for businesses and workers in terms of adapting to new technologies and managing the transition. The role of governments and international organizations in facilitating this transformation will be crucial.
E. Geopolitical risks and geoeconomic developments
Ongoing conflicts, sanctions, and diplomatic tensions will continue to pose significant risks for the global economy in 202Geopolitical instability could impact energy markets, leading to volatility in commodity prices and potential disruptions to energy supplies. Tensions between major powers could also impact financial stability, with potential consequences for capital flows, exchange rates, and overall economic growth.
IV. Risks and Challenges to the Global Economic Recovery
Debt sustainability, inflation, and fiscal policy dilemmas
- Potential risks from high public and private debt levels: As the global economy recovers from the pandemic, soaring debt levels pose a significant challenge. Public debt has reached unprecedented heights due to emergency spending, while private debt remains high after years of easy credit conditions. These mounting debts could lead to a debt crisis if interest rates rise or economic growth falters.
- Inflationary pressures and central banks’ response: Central banks are facing a dilemma as they grapple with inflationary pressures. The combination of increased government spending, reopening economies, and supply chain disruptions could push prices higher. Central banks must walk a fine line between supporting economic recovery and containing inflation. Some, like the Federal Reserve, have signaled that they are prepared to raise interest rates sooner than expected.
Climate change, energy transition, and resource scarcity
- Economic implications of climate change policies: Climate change policies aim to reduce greenhouse gas emissions and transition to renewable energy sources. However, these measures come with economic implications, such as higher costs for businesses, consumers, and governments. Carbon pricing, subsidies for renewable energy, and regulations on emissions could impact competitiveness and economic growth.
- Impact on energy markets and geopolitical tensions: The energy transition is also reshaping energy markets, with renewables gaining market share from fossil fuels. This shift could lead to geopolitical tensions as countries compete for access to scarce resources. For instance, Russia’s role in European energy markets remains a significant concern.
Demographic shifts, aging populations, and labor markets
- Challenges of population aging on economic growth and productivity: Demographic shifts, particularly population aging, pose challenges to economic growth and productivity. Older populations consume more resources and contribute less to the labor force. Governments must address these challenges by implementing policies that encourage labor force participation, such as flexible work arrangements and education and training programs.
- Implications for labor force participation, social security systems, and pension plans: Aging populations also have implications for labor force participation, social security systems, and pension plans. As more people retire, there are fewer workers to support the pension system. This could lead to funding gaps or higher taxes to maintain the system. Meanwhile, some countries face a labor shortage due to low birth rates and an aging population.
Conclusion and Recommendations
In our global economic outlook analysis, we have identified several key trends and challenges that are shaping the economic landscape.
Recap of key findings:
- Slow and uneven recovery: The global economy is recovering from the COVID-19 pandemic, but the pace and shape of the recovery vary significantly across regions and sectors.
- Heightened macroeconomic risks: The economic outlook is clouded by a number of risks, including geopolitical tensions, trade conflicts, and environmental challenges.
- Shift to a more sustainable growth model: The need for a more sustainable economic model is increasingly apparent, with a growing recognition of the importance of addressing climate change and promoting inclusive growth.
Implications for investors, businesses, and policymakers:
Strategies for navigating macroeconomic risks and uncertainties:
Investors, businesses, and policymakers need to be prepared for a complex and uncertain economic environment. This may require adopting new strategies to manage risks, such as diversifying portfolios, building resilient supply chains, and developing contingency plans for various scenarios.
Potential opportunities for growth and innovation:
Despite the challenges, there are also opportunities for growth and innovation. For example, the shift to a more sustainable economic model is likely to create new markets and industries, while advances in technology can help improve productivity and efficiency.
Call to action for international cooperation on economic challenges:
Need for multilateral dialogue and coordinated action on global issues:
The economic challenges we face are too complex and interconnected to be addressed by any single country or organization. Therefore, it is essential that there be a renewed commitment to multilateral dialogue and coordinated action on global issues.
Role of institutions like G20, IMF, and World Bank in promoting economic stability and sustainable growth:
Institutions such as the G20, IMF, and World Bank play a critical role in promoting economic stability and sustainable growth. They can help coordinate international efforts to address common challenges, provide financial support to countries in need, and promote best practices and policies that foster economic development.