- Emerging technologies and green investments lead the charge in transforming industries and driving resilient economic strategies
The global economy in 2024 has been characterised by a mixture of recovery and resilience, amidst ongoing challenges and uncertainties. As the world continues to navigate the aftermath of the Covid-19 pandemic, geopolitical tensions, and climate change, understanding the economic conditions of this year is crucial for projecting the future.
In 2024, the global economy has shown signs of steady growth, albeit at a slower pace compared to pre-pandemic levels. The International Monetary Fund (IMF) projected a global growth rate of approximately 3.2%, reflecting a balance between recovery efforts and persistent challenges.
Despite an improvement in near-term prospects, the global outlook remains subdued by historical standards. In 2024-25, growth is set to underperform its 2010s average in nearly 60% of economies, comprising over 80% of the global population. Downside risks predominate, including geopolitical tensions, trade fragmentation, higher-for-longer interest rates, and climate-related disasters. Global cooperation is needed to safeguard trade, support green and digital transitions, deliver debt relief, and improve food security.
Global growth is envisaged to reach a slightly faster pace this year than previously expected, due mainly to the continued solid expansion of the US economy. However, the extent of expected declines in global interest rates has moderated amid lingering inflation pressures in key economies. By historical standards, the global outlook remains subdued; both advanced economies and emerging market and developing economies (EMDEs) are set to grow at a slower pace over 2024-26 than in the decade preceding the pandemic. Domestic demand is projected to improve in many EMDEs this year, in line with a moderate cyclical recovery from the effects of high inflation, tight financial conditions, and anemic industrial activity.
Aggregate EMDE growth is nonetheless poised to decelerate slightly mainly because of idiosyncratic factors in some large economies. Moreover, significant challenges persist in vulnerable economies — including in low-income countries (LICs) and those facing elevated levels of conflict and violence — where growth prospects have deteriorated markedly since January. Global trade growth is recovering, supported by a pickup in goods trade. Services-trade growth is expected to provide less of a tailwind this year, given that tourism has nearly recovered to pre-pandemic levels. However, the trade outlook remains lackluster compared to recent decades, partly reflecting a proliferation of trade-restrictive measures and elevated trade policy uncertainty.
Aggregate commodity prices have increased since late last year. Amid fluctuations, average oil prices are expected to be slightly higher in 2024 than in 2023, underpinned by a tight demand-supply balance in a context of continued geopolitical tensions. Nonetheless, average energy prices are projected to be marginally lower this year than last — reflecting notable declines in prices for natural gas and coal — while remaining well above pre-pandemic levels. Metals prices are expected to be little changed over the forecast horizon, as demand related to metals-intensive clean energy investments and a broader pickup in global industrial activity attenuate the impact on commodity demand of declining real estate activity in China. Well-supplied markets for grains and other agricultural commodities should see edible food crop prices decline modestly. Inflation continues to wane globally, making progress toward central bank targets in advanced economies and EMDEs, but at a slower pace than previously expected. Core inflation has remained stubbornly high in many economies, supported by rapid growth of services prices. Over the remainder of 2024, continued tight monetary policy stances and slowing wage increases should help reduce inflation further.
Key economic indicators such as GDP growth, inflation rates, unemployment levels, and trade balances vary across regions, highlighting the diverse economic landscapes.
Advanced economies:
- The United States and European Union experienced moderate growth, driven by consumer spending, robust labour markets, and government stimulus measures.
- Japan and South Korea also showed positive growth, benefiting from strong export performance and technological advancements.
Emerging markets:
- China and India continued to be major growth engines, with resilient manufacturing sectors and increasing domestic consumption.
- Latin American and African economies faced mixed outcomes, grappling with political instability, external debt burdens, and volatile commodity prices.
Developing economies:
- Many developing countries struggled with high inflation, currency depreciation, and limited access to vaccines and healthcare resources, impeding their economic recovery.
Key economic indicators
Inflation: Persistent inflation remained a significant challenge for both advanced and emerging economies. Supply chain disruptions, increased energy prices, and rising demand contributed to higher inflation rates. Central banks implemented tighter monetary policies to combat inflation, but this also posed risks to economic growth.
Unemployment: Labour markets showed improvement, with decreasing unemployment rates in many regions. However, disparities persisted, particularly among youth and marginalized groups. The shift towards remote work and digitalisation also led to structural changes in employment patterns.
Trade balances: Global trade rebounded as supply chains adapted to new realities. However, trade tensions and protectionist policies continued to affect cross-border commerce. The rise of regional trade agreements and digital trademarked significant trends in the global trade landscape.
Geopolitical tensions: Ongoing geopolitical conflicts, such as those between major powers and regional disputes, added layers of uncertainty to the global economic environment. Sanctions, trade restrictions, and military confrontations had far-reaching economic implications.
Causes and contributing factors
Pandemic aftermath: The lingering effects of the Covid-19 pandemic continued to influence economic conditions. Health crises, vaccine distribution challenges, and shifts in consumer behavior impacted various sectors, from tourism to healthcare.
Monetary policies: Central banks worldwide faced the delicate task of balancing inflation control with economic growth. Interest rate hikes and monetary tightening were common, affecting borrowing costs, investment, and consumer spending.
Climate change: Extreme weather events, natural disasters, and environmental degradation had significant economic repercussions. Climate change mitigation and adaptation efforts became increasingly crucial, with investments in renewable energy and sustainable practices gaining momentum.
Technological advancements: Rapid technological advancements and digital transformation reshaped industries and markets. Automation, artificial intelligence, and digital services created new opportunities while posing challenges to traditional business models and labor markets.
Global supply chains: The restructuring of global supply chains to enhance resilience and reduce dependencies on single sources led to changes in production and trade patterns. Companies diversified their supply bases and invested in local manufacturing capabilities.
Regional economic performance
North America: The United States saw moderate economic growth driven by consumer spending, job creation, and technological innovation. Canada and Mexico also experienced positive growth, benefiting from trade agreements and economic integration.
Europe: The European Union showed resilience with steady growth across member states. The adoption of green policies, digitalisation, and investments in infrastructure supported economic recovery. However, inflation and energy prices posed challenges.
Asia-Pacific: China and India remained key drivers of economic growth in the region. Southeast Asian economies, such as Vietnam and Indonesia, saw robust growth due to manufacturing and export activities. Japan and South Korea focused on technological innovation and trade expansion.
Latin America and the Caribbean: Economic performance varied across the region. Brazil and Mexico showed modest growth, while countries like Argentina and Venezuela faced economic instability and high inflation. Structural reforms and political stability were crucial for sustained growth.
Middle East and North Africa: Oil-exporting countries benefited from higher oil prices, leading to improved fiscal balances and economic growth. Diversification efforts and investments in non-oil sectors gained momentum. Political stability and security remained key factors.
Sub-Saharan Africa: The region faced challenges such as high inflation, external debt, and limited access to vaccines. However, some countries showed resilience through agricultural growth, digitalization, and regional trade agreements.
Projections for 2025
Global economic growth: The global economy is projected to grow at a rate of approximately 3.3% in 2025. Advanced economies are expected to continue their recovery, while emerging and developing economies will face diverse growth trajectories.
Inflation control: Central banks are anticipated to maintain a focus on controlling inflation through monetary policies. Gradual easing of inflationary pressures is expected as supply chain disruptions subside and energy prices stabilise.
Technological integration: Technological advancements will continue to drive economic growth. Investments in digital infrastructure, automation, and innovation will reshape industries and create new opportunities for growth.
Climate resilience: Climate change mitigation and adaptation efforts will gain prominence. Investments in renewable energy, green technologies, and sustainable practices will shape economic policies and development strategies.
Global trade dynamics: Trade tensions and protectionist measures may persist, but regional trade agreements and digital trade will play a significant role in shaping global trade dynamics. Supply chain diversification and resilience will remain priorities for businesses.
Geopolitical uncertainties: Geopolitical tensions will continue to influence economic conditions. Diplomatic efforts, conflict resolution, and international cooperation will be critical in mitigating risks and fostering stability.
Labour market trends: The labor market will continue to evolve with the adoption of remote work, gig economy, and automation. Policies aimed at enhancing workforce skills, education, and social protection will be essential for inclusive growth.
Investment and infrastructure: Public and private investments in infrastructure, healthcare, education, and digital technologies will drive economic development. Infrastructure projects will boost economic activity and create jobs.
The last word
The global economic conditions in 2024 reflect a complex interplay of recovery and resilience amid ongoing challenges. Understanding the reasons and causes behind these conditions provides valuable insights for projecting the future. As we look ahead to 2025, global cooperation, prudent policies, and sustainable practices will be key to fostering economic growth and stability. By analyzing the trends and dynamics shaping the global economy, we can navigate the uncertainties and build a more prosperous and inclusive future.
The author, Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger, and motivational speaker. He writes articles on diversified topics. He can be reached at nazir_shaikh86@hotmail.com