World Economy in Spring 2024: Momentum remains subdued

The global economy is currently expanding at a moderate pace, albeit with considerable differences in momentum across countries. The economy in the United States is still growing at robust rates, whereas the euro area is in a phase of stagnation; in the United Kingdom and Japan, production even declined noticeably in the second half of 2023. While the growth differentials are likely to narrow over the forecast horizon, a strong upturn is not in sight: Europe and Japan is gradually picking up as the dampening effects of the inflation shock have run their cause but, at the same time, the expansion in the United States is losing momentum as fiscal stimuli fade. Also, economic activity in China is likely to expand only modestly going forward due to structural problems, and growth will be noticeably weaker on average in 2024 than in the previous year. This is the most important reason why global output growth on a purchasing power parity basis will be somewhat lower at 2.8 percent than in 2023 (3.1percent). For the coming year, we expect an acceleration of growth to 3.1 percent again. Our forecast remains unchanged for 2024 from our December forecast and has been revised marginally – by 0.1 percentage point – downwards for 2025. Although unemployment in the advanced economies will increase slightly over the next quarters, it will remain at a historically low level. Inflation has fallen significantly compared to the peak at the end of 2022, but has only fallen slightly in recent months. The rise in prices for services in particular is proving to be stubborn, meaning that inflation rates are not expected to fall sustainably close to the target levels again until 2025. Risks for the global economy are primarily of geopolitical nature and are reinforced by the uncertainties surrounding the US presidential election. An escalation of trade conflicts, for example, would have a negative impact on global economic activity.