In 2023-24, the global economy overview dances between resilience and recovery, navigating challenges and shifting geopolitical landscapes.
The global economy continues to navigate a dynamic landscape, encountering a blend of challenges and opportunities. Demonstrating remarkable resilience, it undergoes a steady but gradual recovery, albeit with regional disparities. According to the International Monetary Fund (IMF), global growth maintained a modest rate of 3.2% in CY 2023. Multiple factors, including ongoing geopolitical conflicts, inflation, a sluggish recovery in China, volatility in energy and food markets, and elevated interest rates, have led to a slowdown in global economic growth.
Furthermore, the crisis in the Red Sea route has caused the biggest diversion of global trade in decades, resulting in higher logistical costs, shipment delays, elevated fuel and commodity prices, and industry-wide disruptions.
Region-wise Growth
| Region | CY 2023 | CY 2024 (P) | CY 2025 (P) |
|---|---|---|---|
| Global Economy | 3.2 | 3.2 | 3.2 |
| Advanced Economies (AEs) | 1.6 | 1.8 | 1.7 |
| Emerging Markets and Developing Economies (EMDEs) | 4.3 | 4.2 | 4.2 |
(Source: International Monetary Fund)
Performance of Major Economies
Despite these challenges, signs of stable growth, strong economic performance in the United States and several major emerging market and developing economies, coupled with inflation reaching target levels in advanced economies, indicate a reduced likelihood of a severe economic downturn. Furthermore, other positive factors include the diminishing impact of previous energy price shocks and a significant resurgence in labour supply in many advanced economies.
Global Inflation Trends
Global inflation, a key concern over the past three years, continues to recede at a faster pace from 8.7% in CY 2022 to 6.8% in CY 2023. Despite headline inflation experiencing a decline from its unprecedented peaks, core inflation has remained persistent and is expected to decline gradually.
Brent Crude Oil Prices
The price of Brent crude oil averaged USD 83 per barrel in CY 2023, down from USD 101 per barrel in CY 2022. However, the spot price of Brent crude oil averaged USD 90 per barrel in April 2024 due to escalating tensions in the Middle East, attacks on Russian refineries, and anticipated voluntary production cuts by OPEC+ until the end of June 2024.
Global Trade Resilience
Despite the major economic shocks, global trade has been resilient in recent years. Merchandise trade experienced a decline of 1.2% in CY 2023 as import demand in real terms fell sharply in Europe, declined in North America, and remained flat in Asia. However, imports surged in the Middle East and the Commonwealth of Independent States (CIS) region.
China’s Economic Performance
China’s GDP growth grew from 3.0% in CY 2022 to 5.2% in CY 2023, primarily due to higher government spending. The shakier economic growth recovery of China in CY 2023 is attributed to depression in the real estate market and tepid demand. China’s central banks announced cutting the reserve requirement ratio (RRR) for all banks by 50 basis points (bps) as part of a slew of measures to support the fragile economy.
United Kingdom’s Economic Performance
The GDP in the UK contracted from 4.3% in CY 2022 to 0.1% in CY 2023. The decline in growth reflects tighter monetary policies to curb still-high inflation and lingering impacts of the terms-of-trade shock from high energy prices.
Japan’s Economic Performance
Economic growth in Japan increased to 1.9% in CY 2023 compared to 1.0% in CY 2022, supported by pent-up demand, a surge in inbound tourism, accommodative policies, and a rebound in auto exports that had earlier been held back by supply chain issues.
Germany’s Economic Performance
The GDP growth in Germany decreased from 1.8% in CY 2022 to 0.3% in CY 2023, due to the impact of high energy prices, weaker industrial demand, and higher interest rates.
Key Facts Table
| Region/Economy | 2023 Growth | 2024 Growth (P) | Key Factors |
|---|---|---|---|
| Global Economy | 3.2% | 3.2% | Resilience amidst geopolitical and economic challenges |
| Advanced Economies (AEs) | 1.6% | 1.8% | Inflation target levels, strong US performance |
| Emerging Markets and Developing Economies (EMDEs) | 4.3% | 4.2% | Regional disparities, higher growth in Middle East |
| United States | 2.5% | – | Strong recovery, tight labor market, rising wages |
| China | 5.2% | – | Government spending, real estate market issues |
| United Kingdom | 0.1% | – | Tighter monetary policies, energy price impacts |
| Japan | 1.9% | – | Pent-up demand, inbound tourism, accommodative policies |
| Germany | 0.3% | – | High energy prices, weaker industrial demand |
| Global Inflation | 6.8% | – | Decline from peaks, persistent core inflation |
| Brent Crude Oil Price | $83/barrel | – | Middle East tensions, OPEC+ production cuts |
| Global Trade | -1.2% | – | Resilient despite shocks, import demand variations |
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Global Economic Resilience in CY 2024
The global economy is expected to maintain its resilience in CY 2024. The IMF projects sluggish global growth at 3.2% for both CY 2024 and CY 2025. Global headline inflation is expected to decrease to 5.9% in CY 2024 and 4.5% in CY 2025. Furthermore, according to the forecast of the Energy Information Administration (EIA), the Brent crude oil price is expected to average USD 88 per barrel in CY 2024 and USD 85 per barrel in CY 2025. With the improvement in the economic landscape, the World Trade Organization predicts a moderate recovery in global merchandise trade volume, with growth rates expected to reach 2.6% in CY 2024 and further increase to 3.3% in CY 2025.
Shaping Factors of the Global Economic Outlook
The global economic outlook in CY 2024 will be shaped by elevated interest rates as the fight against inflation persists, withdrawal of fiscal support amid high debt weighing on economic activity, low underlying productivity growth, a tight job market, and economic uncertainties. Furthermore, regional conflicts and geopolitical unrest could elevate energy prices, reduce energy supply, or raise the risks of supply disruptions, contributing to additional geo-economic fragmentation and posing downside risks for the global economy.
The prolonged Russia-Ukraine conflict has the potential to further dampen the overall economic outlook of the European Union. Additionally, an escalation in the Middle East crisis could impact oil and commodity prices and the global supply chain.
Positive Factors Reinforcing the Outlook
However, positive factors, including rapid disinflation, strong economic performance of the US and several large emerging market and developing economies, economic stimulus in China, the resilience of Europe amid the ongoing war, and easing of supply chain bottlenecks will reinforce the outlook of the global economy. After rapid expansion in CY 2023, the Asia-Pacific (APAC) region is expected to be the fastest-growing region of the world economy in CY 2024, supported by robust domestic demand in East Asia and India.
(Source: IMF Economic Outlook, April 2024; World Trade Organization; Economic Times; S&P Global)
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