The global economy has defied expectations for the most part in 2024. It started the year stronger than anticipated. As Kavan Choksi / カヴァン・チョクシ says, inflation control is working to a good extent, and paving the way for central banks to loosen their grip on interest rates. Despite the healthy consumer spending and robust jobs markets worldwide, inflation control measures seem to be working. However, even though the global growth forecasts have improved, they still are below historical averages. Regional variations particularly paint a complex picture, with the United States being the bright spot, while China, the eurozone and the UK face headwinds.
Kavan Choksi / カヴァン・チョクシ talks about how the global economy is faring in 2024
The economy of the United States grew at a robust 3.2% in the last quarter of 2023 owing to robust domestic demand and government investment. Consumer spending has remained fairly steady, supported by supportive fiscal policies and low unemployment. Infrastructure spending is also booming in the country, while the housing market stays resilient. Even though a few of these supportive factors are expected to fade, US growth is still projected at a respectable 2.6% for 2024.
Inflation has substantially dropped from its peak of 9.1% in June 2022, settling at 3.2% in February 2024. Inflation is likely to continue to fall and reach 2.8% by 2024 and 2.4% by late 2025. This trend may lead the US Federal Reserve the US Federal Reserve to first cut interest rates down the line, potentially bringing them down to 4.5%-4.75% by December 2024.
While the European economy is certainly facing challenges, they do have certain bright spots. The European Central Bank (ECB) has downgraded its growth and inflation forecasts recently owing to a weak domestic market, however, the service sector in the country is gaining momentum, which can help balance out the sluggish manufacturing industry. Even though the first half of 2024 was pretty stagnant for the European economy, things are likely to pick up later in the year. The loosening grip of ECP on interest rates may encourage spending and investment. Moreover, wages are finally outpacing inflation. On the whole, eurozone growth is forecast at a modest 0.4% in 2024, rising to 1.3% in 2025. Inflation has also started to cool in the economy, even though it is slower than expected.
As Kavan Choksi / カヴァン・チョクシ says, subsequent to a short-lived recession, the UK economy is struggling to gain momentum. While there was a minor bounce in January, driven by activities in construction and services, the overall picture is still uncertain. Inflation is however finally coming down and is expected to dip below the Bank of England’s 2% by the end of 2024.
China has ambitiously targeted a 5% growth rate for 2024 while maintaining controlled government spending with a 3% fiscal deficit and keeping unemployment at 5%. However, meeting these goals could be challenging. To ensure economic stability, China may have to continue reducing debt and implement additional policy adjustments to address these economic imbalances.