Baltrags Global Economic outlook for the second half 2024
The global economic outlook shows signs of recovery, bolstered by easing inflation, better supply conditions, and robust labor markets in advanced economies. These factors have led to real income gain, increased consumer spending, and other economic activities in the first half of 2024. However, growth is anticipated to stay below pre-pandemic levels. Several challenges persist, including renewed inflationary pressure due to escalating geopolitical tensions and the possibility of an extended period of tight monetary policy, contributing to ongoing uncertainty in the outlook.
Eurozone update in a nutshell
In the Eurozone, real GDP growth is projected to remain stagnant initially, before increasing as inflation eases and further anticipated rate cuts take effect (first rate cut done on June 6, 2024 by the ECB). Economic recovery in the region’s major countries is sill hampered by high interest rates and weak external demand, which limit exports of manufactured goods. However, the pace of economic growth varies, across the bloc, with some southern European countries outperforming their nothern counterparts. Thanks to a sustained rebound in tourism and lower exposure to the manufacturing downturn. Spain, Portugal and Greece are expected to see real GDP growth rates that exceed both the regional average and the growth rates of Germany and France in 2024.
Emerging economies to see steadier growth
Emerging and developing economies are projected to grow significantly faster than advanced nations. Emerging Asian countries like India, Indonesia, Vietnam and the Philippines are expected to experience some of the highest growth rates worldwide, driven by robust domestic consumption and strong investment attraction.
China’s growth forecast was lifted recently, due to increased investment and manufacturing activities. However, ongoing issues in the real estate sector and weak private consumption will continue to limit economic expansion in the world’s second largest economy.
Geopolitical tensions represent a key downside risk
Despite improved growth prospects, the global economic outlook 2024-2025 remains vulnerable to several downside risks. Geopolitical tensions are the main factor contributing to potential inflation increase, which in turn poses a threat to economic growth.
Increasing global geopolitical tensions could further fragment the global economy with a negative impact on growth. Additional downside risks to the global outlook include a more severe economic slowdown in China and the Eurozone. On the upside, the global economy might experience a stronger rebound due to falling commodity prices and increased stimulus spending. Additionally faster than expected growth in some major countries around the globe (e.g. India, China, Eurozone, Latin America) would give a boost to global growth.
Baltrag focuses on all these major topics and is adjusting their client investments accordingly.
