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Global Economic Outlook: Q1 2024

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In 2024, the global economy is expected to register slowing growth for the second consecutive year. This is primarily due to the dampening effect of high interest rates in most major economies globally, in addition to weakening growth in China, the world’s second largest economy. Yet, this comes after global growth consistently outperformed expectations in 2023, withstanding numerous headwinds, especially ongoing and widening geopolitical tensions.

Amidst the slowdown, the global economy will experience a gradual normalising of economic conditions following the profound disruptions in recent years, particularly in the second half of 2024, with expectations of inflation further easing and monetary policy loosening. This will support a reaccelerating global growth momentum that will further strengthen in 2025.

In Euromonitor International’s Q1 2024 baseline forecast, the global real GDP growth forecast for 2024 is 2.7%, unchanged from the Q4 2023 forecast, and 3.1% in 2025. Global inflation is expected to further decelerate to 5.4% in 2024 and 3.6% in 2025.

High interest rates will slow advanced economies before growth momentum picks up

Primarily affecting the global trend, advanced economies will face a slowdown of real GDP growth from 1.5% in 2023 to an expected 1.3% in 2024. Yet, the projection in 2024 was revised upwards in Euromonitor International’s Q1 2024 baseline forecast, following 1.1% in Q4 2023. This is solely due to the considerably improved outlook for the US economy in 2024 after it has become more likely that it will achieve a soft landing, a scenario where rising interest rates will bring down inflation without causing a recession. Meanwhile, other advanced economies saw their outlook deteriorate.

The US economy showed surprising resilience throughout 2023, not only avoiding a recession but maintaining positive growth momentum, despite the impact of high interest rates, and therefore saw a significant upward revision in the Q1 2024 baseline forecast to 1.5% (0.8% in Q4 2023). The dampening effect of tight monetary policy will continue to be offset, at least partly, by largely persistent labour market strength and resilient consumer spending in 2024. Growth momentum is expected to accelerate in the second half of the year as inflation eases further and interest rates likely see cuts, leading to increased real GDP growth in 2025 of 1.7%.

The Eurozone economy will continue to show broad-based weakness in 2024

Source: Euromonitor International

Following a considerable slowdown in 2023, the bloc will record only a minimal recovery in 2024, an outlook that saw a further downward revision to 0.8% real GDP growth (1.0% in Q4 2023). Slow growth is primarily due to the combined impact of elevated inflation and tight monetary policy which dampens demand. Yet, growth momentum is expected to accelerate in the second half of 2024 as well, driven by resilient employment, rising real incomes, likely falling interest rates and a recovery in foreign demand. This will support stronger growth in 2025, expected at 1.5%.Chart showing Global Real GDP Growth Baseline Forecast 2022-2026

Rising economies in Asia Pacific drive global growth in 2024 as China slows

Emerging and developing economies are expected to see largely stable growth while steadily outperforming advanced economies, with real GDP growth forecast at 3.9% in 2024 and 4.0% in 2025, after 4.2% in 2023. Within this group there is an increasingly diverse picture, with China, as the global growth engine, weakening while India and numerous economies in Southeast Asia are surging, partially facilitated by ongoing structural changes in global trade and investment.

The Chinese economy is expected to slow considerably in 2024, falling to 4.5% real GDP growth (4.7% in the Q4 2023 forecast), with the downward trend in growth continuing in 2025 at 4.3%. China faces several economic challenges, most notably due to its ailing real estate sector. Resulting concerns and low confidence among consumers and businesses will keep spending and investment subdued, which, in turn, raises economic risks associated with deflation. Growth comes under further pressure due to declining foreign direct investment into China as rising geopolitical tensions increasingly have meaningful implications for economic activity.

Overall, Asia Pacific will remain the fastest growing region globally, fuelled by high levels of consumption and investment

Source: Euromonitor International 

Here, numerous emerging and developing economies are driving global growth and defy the global trend with high real GDP growth in 2024, including India (6.1%), Indonesia (4.9%), the Philippines (5.6%) and Vietnam (5.8%). These economies will even see accelerating growth momentum in 2025.

Global inflation will see continued decline at a slowing pace in 2024

In 2024, the downward trend of global inflation is set to continue, with the rate expected to decline to 5.4% (4.9% in the Q4 2023 forecast). The upward revision compared to the Q4 2023 forecast is because inflation has been particularly persistent in developing economies that have generally been more vulnerable to price shocks and have had less effective monetary policy.

The slowdown of global inflation will be driven by the ongoing economic normalisation following the economic disruptions in recent years. In addition, the lagging effect of high interest rates will slow economic activity and therefore reduce demand and soften labour markets. Yet, following a significant decline of global inflation in the second half of 2023, the pace of moderation is expected to slow in 2024 in view of a more persistent underlying measure of inflation excluding food and energy. In 2025, global inflation is set to decline notably to 3.6%.Chart showing Global Consumer Price Inflation Baseline Forecast 2022-2026

Global Fragmentation scenario significantly weakens global growth potential

The global economy faces a new economic reality following the COVID-19 pandemic and the war in Ukraine. This reality is characterised by unusually high uncertainty and a volatile high-risk environment that has broadened the range of plausible outcomes, thereby making scenario planning increasingly vital.

Euromonitor International’s Global Fragmentation scenario captures the implications of escalating geopolitical tensions, economic multipolarity and growing fragmentation of the global economy. The scenario assumes that economies globally divide into multiple blocs, leading to rising trading costs due to a range of possible factors, such as protectionist policies, tariffs and other trade barriers. Consequently, businesses face higher costs and reduced access to markets, while consumers experience higher prices and reduced choice.

Worsening global fragmentation will impact global growth via trade, investment, commodity prices and productivity channels. Under this scenario (probability of 15-25% over a 1-year horizon), most markets in both advanced and developing worlds will face slower growth potential, with trade-dependent economies hit the hardest, and more volatility in prices in the medium and long term, resulting in global real GDP growth slowing to 2.4% in 2024, and 2.1% in 2025.

Learn more about the global economic outlook in our Q1 2024 report extract. You can get an in-depth look at the impacts of different macroeconomic scenarios in our full report, Global Economic Forecasts: Q1 2024.

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