The global economy in 2024 is anticipated to witness stabilized growth, albeit at slightly lower rates, according to Moody's recent Global Macro Outlook for 2024-25. The Group of Twenty (G-20) economies is projected to experience expansions of 2.4 percent in 2024 and 2.6 percent in 2025, reflecting a moderation from the 2.9 percent growth observed in 2023. This article explores the key factors shaping the economic landscape, including policy shifts, geopolitical tensions, regional integration efforts in Africa, and the rejuvenation of global manufacturing.
Policy Normalization and Central Banks:
One notable aspect of the economic outlook is the transition towards policy normalization among major central banks, such as the Federal Reserve, European Central Bank, and Bank of Japan. The Fed is expected to cut the federal funds rate by a cumulative 100 basis points in 2024, with further reductions in 2025. The ECB may also initiate policy normalization in the second quarter, contingent on continued inflation decline. These shifts signal a cautious approach to monetary policy as economies strive for stability.
Geopolitical Tensions:
While macroeconomic risks are subsiding, geopolitical tensions continue to pose challenges. The ongoing Russia-Ukraine conflict and tensions in the Middle East and Asia contribute to uncertainty, potentially impacting commodity markets and global trade. Despite these concerns, signs of stabilisation are evident, supported by strong performances in large economies and recovery in emerging markets like India, Indonesia, Brazil, and Mexico.
Regional Integration in Africa:
Africa's economic landscape reveals a mixed picture, with the Economic Commission for Africa highlighting the continent's inclination towards engaging with the wider world rather than focusing on intracontinental trade. The pace of regional integration in Africa appears sluggish, with limited progress in crucial infrastructure development areas such as rail transport and energy infrastructure. However, notable achievements include the adoption of the African Continental Free Trade Area and the Single African Air Transport Market.
Country-Specific Insights:
Moody's revised upwards the 2024 growth forecast for the United States to 2.1 percent, reflecting the economy's resilience. India emerges as the fastest-growing G-20 economy, with a growth estimate of 6.8 percent. However, growth estimates for Germany, the UK, and Saudi Arabia have been adjusted based on recent data. The outlook suggests steady normalisation in economic activity, with the US economy's strong performance driving global growth.
Global Manufacturing Rejuvenation:
S&P Global reports a positive shift in global manufacturing, indicating signs of rejuvenation in February 2024. Output increased for a second consecutive month, supported by the first increase in new orders since June 2022. Notably, consumer goods makers posted solid growth. The rise in manufacturing output was driven by increased new business volumes and efforts to address backlogs, with total new orders experiencing a modest increase for the first time in 20 months
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