The Economist Intelligence Unit (EIU) has revised its global real Gross Domestic Product (GDP) growth forecast for 2024 to 2.5%, up from 2.4%. This revision indicates that growth will remain steady rather than slowing from 2023. The London-based firm attributes this resilience to high interest rates and geopolitical risks.The EIU’s update reflects an upward adjustment for US growth in 2024 to 2.2% from the previous 2%, alongside upward revisions for several European economies, boosting euro area growth to 1% from 0.8%, and for Brazil to 2.1% from 1.8%.The EIU has also adjusted its expectations for future monetary policy, reducing the anticipated monetary loosening. Specifically, it has removed a 25-basis point cut from the loosening cycles of both the US Federal Reserve and the European Central Bank for 2024-25. Conversely, the EIU now expects the Bank of England to cut rates more quickly than previously forecast, reducing its rate to 3.5% by the end of 2025, compared to the earlier prediction of 4.25%.Geopolitical factors are expected to lead to more fragmentation and regionalization in the global economy from 2024 to 2028, as alliances tighten and competing blocs form. This trend, coupled with the return of industrial policy, sanctions, and new incentives, is likely to push firms towards less efficient supply chains, increase trade tensions in strategic sectors, and complicate competition in the global marketplace. Such developments are expected to hamper growth potential, with the EIU predicting global real GDP will expand by an average of 2.8% annually over the next five years, below the 3% average of the 2010s.In the immediate term, however, the global economy is showing resilience despite international conflict and higher interest rates. This resilience is largely due to the strong performance of the US economy, driven by robust household finances, increasing manufacturing investment, and a booming technology sector. While the outlook for other regions is less dynamic, Europe is expected to gain momentum gradually in 2024, and modest government stimulus in China is helping the economy recover from a property-related slump. Emerging markets will benefit from a rebound in global trade and firm commodities demand, although they will face challenges from a strong US dollar and high debt-servicing costs.
