Global economic

outlook
Strong US economy drives
global growth upgrade
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GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

Global economic outlook

• We have raised our global real GDP growth forecast for 2024 from 2.3% to 2.4%. This means that
growth in 2024 will be basically unchanged from an estimated 2.5% in 2023. Although growth
remains sedate by historical standards, this stability demonstrates resilience in the global economy,
given high interest rates and geopolitical tensions.

• The change in global growth follows a further upgrade to our US GDP growth forecast, which now
stands at 1.8% (up from 1.3% previously), with the latest US data pointing to continued resilience. The
US upgrade has more than offset a downgrade in China’s growth forecast from 4.9% to 4.7%. China’s
downgrade reflects a dimmer outlook for consumption and for property-related activity, owing to
delays in support for distressed developers.

• Our global monetary policy forecasts are largely unchanged from the previous month, but we
have brought forward to the second quarter of this year the date at which the Bank of Japan (BOJ,
the central bank) will exit its negative interest-rate policy. The BOJ is then expected to move to a
positive, albeit only slightly, rate in early 2025. Although these are incremental changes, they will still
be sufficient to encourage a reshoring of Japanese capital that will tighten borrowing conditions in
other markets.

Rising geopolitical competition will weigh on growth potential

Europe has seen biggest change in geopolitical tensions, but no region has been immune
(level of threat posed by international disputes; % of total geographies, by region)
None Low Moderate High Very high

Americas Asia
100 100

80 80

60 60

40 40

20 20

0 0
2010 12 14 16 18 20 22 23 2010 12 14 16 18 20 22 23

Europe MEA
100 100

80 80

60 60

40 40

20 20

0 0
2010 12 14 16 18 20 22 23 2010 12 14 16 18 20 22 23
Source: EIU.

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GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

The Israel-Hamas war is adding complexity to a global geopolitical environment that is characterised
by intensifying competition and more frequent conflict. Underlying these changes is the diffusion
of global power and greater uncertainty over the direction of US foreign policy. We believe that
geopolitical tensions, as also stoked by Russia’s invasion of Ukraine and US-China rivalry, will lead
to more fragmentation and regionalisation in the world economy, dragging on growth potential.
Government policy, including sanctions and the provision of new industrial incentives, will push firms
to adopt more inefficient supply chains and also stoke global trade tensions. The escalation of current
conflicts in Asia, Europe or the Middle East would upend our global outlook.

Global growth will not be strong, but a recession will be avoided

Relatively high interest rates will constrain global economic activity, but there are no indications of
systemic debt strains that could pull the world economy into recession. The impact on the US economy
of monetary policy tightening has been less than we expected, helped by a strong labour market, and
we have revised up our real GDP growth forecast to 1.8% in 2024 (from 1.3% previously). Momentum
in Europe will remain lacklustre in 2024 but a recession will be avoided, whereas moderate stimulus
in China will build some momentum in its economy. Emerging markets will generally benefit from
an expected shift to looser global monetary settings in the second half of the year and a rebound in
global trade. We forecast global economic growth of 2.4% in 2024 (at market exchange rates), almost
unchanged from an estimated 2.5% in 2023. The outlook improves in 2025-28 (we expect annual growth
to average 2.7%), aided by monetary easing and investment in technology and the energy transition,
but growth will still fall short of recent standards—global growth averaged 3% a year in the 2010s.

Markets in Asia, Africa offer main pockets of global growth in 2024

(change in real GDP, 2024; %)

Slowdown but no War in Ukraine

recession for US; NO SE FI
transitioning to
political drama ahead stalemate
IE GB NL DK

CA BE DE CZ PL China’s economy is End of deflation

weak but stabilising in Japan!
US FR CH AT SK RU

MX PT ES IT HU RO UA AZ KZ

CO VE BG TR CN KR JP

EC PE European growth only GR IQ IR PK IN BD MM VN HK TW

marginally improves,
CL BR remaining behind the US IL SA LK TH KH
Asia export
AR MA DZ EG QA MY PH recovery, supply
Growth improving in the chain investment
GH NG ET AE SG
developing world but
held back by instability, UG KE ID PG
debt and climate risks
AO TZ AU NZ
Spike in oil prices from
ZA Middle East conflict could
≤-1 0 1 2 3 4 5 6+ lead to global recession

Source: EIU.

Disinflation is forecast to continue, but upside risks persist

The post-pandemic normalisation of supply, alongside softer demand growth, will drive consumer
price inflation lower in most markets (we forecast that it will average 2.4% across developed economies

2 © The Economist Intelligence Unit Limited 2024

GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

in 2024). However, the rapid price gains of recent years will not be undone. In addition, upside risks
continue to weigh on our inflation outlook. Although remaining far below the levels they reached
during the pandemic, global shipping costs have risen as a result of the disruption of trade in the
Red Sea; should the Israel-Hamas war begin to disrupt oil supply, the impact on hydrocarbon prices
would also be significant. Stronger than expected effects from unpredictable climate conditions on
agriculture output would push up food prices, especially in developing economies.

Red Sea disruptions are putting pressure on global sea freight rates
(US$/40-ft equivalent containers)
Global China-North America (West Coast) China-north Europe
China-Mediterranean China-North America (East Coast)
7,000

6,000

5,000

4,000

3,000

2,000

1,000

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2023 2024
Sources: Freightos Baltic Index (FBX); EIU.

Monetary tightening is over, but there will be caution on loosening

Our forecasts assume that the Federal Reserve (Fed, the US central bank) and the European Central
Bank (ECB) have concluded their policy rate increases. A desire to fully anchor inflation expectations
means that both institutions are likely to move later than markets expect in terms of lowering rates; we

Monetary policy loosening looks likely from Q2 2024

(policy interest rate, %; end-period)
US Japan Euro area UK
6

-1
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2* Q3* Q4*
2022 23 24 25
Source: EIU. *Data from Q1 2024 are EIU forecasts.

3 © The Economist Intelligence Unit Limited 2024

GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

forecast that easing will begin in June, and that it will then proceed fairly gradually. Japan’s gradual move
away from ultra-accommodative settings will continue in 2024, with its policy rate forecast to return
to zero. Some emerging markets will continue to lower rates ahead of the Fed to support growth, as
the exchange-rate outlook stabilises, and China will maintain a loose stance to fend off deflation risk.
We do not expect a return to the near-zero interest rates of the 2010s over the next five years, with
higher trend investment and tightness in labour markets (related to population ageing and workforce
changes) keeping a floor under inflation.

There will be little fiscal headroom to support growth

Elevated government bond yields—the benchmark US Treasury ten-year bond yield is forecast to
average 4.1% in 2024, the highest since 2007—mean that there will be limited space to pursue fiscal
expansion. Governments will be more reluctant to borrow, and debt-servicing costs will absorb larger
portions of their budgets. In this context, some revenue-raising measures are likely, but appetite to
implement spending cuts will generally be limited. Areas of public spending that are likely to prove
more protected will relate to defence, healthcare and industry policy. We expect further sovereign
defaults among frontier markets, and these will generally prove complex to resolve, given a diverse set
of creditors and the weakening influence of global institutions such as the IMF.

Vulnerability to crisis has risen amid shrinking IMF capacity

The limits of the safety nets the IMF can provide are The proportion of EIU-rated sovereigns that are at significant
highlighted by the rapid growth of external public debt risk of default has not fallen back to pre-pandemic levels
in the past decade (US$ bn) (%; year-end sovereign risk ratings by rating band†)
Total global SDR allocations* CCC CC C D
Public & publicly guaranteed external debt stocks, 35
low & middle-income countries
30
Private external debt stocks, low & middle-income countries
0 500 1,000 1,500 2,000 2,500 3,000 3,500 25

20
2002
15

2012 10

2022 0
2015 16 17 18 19 20 21 22 23
*Annual average SDR:US$ exchange rate.
Sources: IMF; EIU. †EIU Financial Risk rating bands run from AAA (least risky) to D (most risky).

Emerging markets, AI and green industries lead growth opportunities

Even with China’s economy slowing to less than 4% growth by 2028, we forecast that developing and
emerging economies will contribute the bulk of global GDP growth over the next five years, helped by
stronger contributions from other markets. India is forecast to expand the quickest of any major global
economy in 2024-28. At the sectoral level, we see opportunities tied to supply-chain restructuring
and to demand for resources that are critical to future industries and the green transition. Artificial
intelligence (AI) will create cost-cutting opportunities and lead to some disruption, but overall we
believe that it is more likely to augment rather than replace human capabilities, resulting in job changes

4 © The Economist Intelligence Unit Limited 2024

GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

China is the largest global producer of critical minerals

(distribution of critical mineral mines, deposits and districts)
Europe
(% of global mine production)
North America 0 20 40 60 80 100
(% of global mine production)
0 20 40 60 80 100 Russia

US France

Latin America
(% of global mine production)
0 20 40 60 80 100
Chile
Peru
Brazil
Argentina

Africa
(% of global mine production)
0 20 40 60 80 100
Asia
DRC .
(% of global mine production)
0 20 40 60 80 100
Mozambique
Madagascar China

Lithium Nickel Graphite Indonesia

Rare earth elements Cobalt Copper Australia

Philippines
Sources: USGS; EIU.

rather than job destruction.

Fragmentation and regionalisation will define politics and policymaking

The passage of the worst of the cost-of-living crisis will ease some pressures on policymakers, but
the austerity measures now required to repair public finances and insulate governments from higher
borrowing costs will be unpopular. Political support for moderate, liberal policies will remain weak,
and economic policymaking will generally push in a more insular direction, to the disadvantage of
international co-operation on climate, technology and trade issues. The 2024 US election will highlight
political and cultural division, and would prompt a sweeping set of policy changes if the former
president, Donald Trump, were to win the presidency for the Republicans (this is not our baseline
forecast, but the risk of it occurring is very high). In Europe, politics is moving towards the right in
response to economic and migration pressures. Authoritarian regimes will face challenges of their own,
and governance in many parts of the world will be challenged by threats ranging from climate change
to terrorism.

5 © The Economist Intelligence Unit Limited 2024

GLOBAL ECONOMIC OUTLOOK
STRONG US ECONOMY DRIVES GLOBAL GROWTH UPGRADE

Potential policy shifts under a Biden or Trump second term

(100=highest likelihood and highest impact) Impact
100
Repeal clean
energy tax credits Blanket 10% 90
Corporate and import tariff
high-income tax 80
increases Measures to
reduce all 70
migrant flows
More 60
conditional
approach to 50
Complete withdraw- US alliances
Deeper corporate al of support for 40
tax cuts Ukraine
Easing of support 30
for Ukraine
20
Tougher enforce-
Tax incentives for 10
ment of aslyum
conventional fuels
restrictions 0
0 20 40 60 80 100
Likelihood
Note. Policies in red indicate those likely under Donald Trump; policies in blue are likely under Joe Biden.
Sources: EIU.

6 © The Economist Intelligence Unit Limited 2024

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