Global Economic Overview 2024
According to the latest updates, most international organizations have raised their global economic growth outlook for 2024 compared to previous forecasts.
Organization for Economic Co-operation and Development (OECD)
In its September 2024 Interim Economic Outlook report, the OECD observed that the global economy maintained significant resilience in the first half of 2024, achieving a growth rate of 3.2%, a 0.1 percentage point increase over the May 2024 forecast. Declining consumer price inflation has supported household consumption, somewhat offsetting the negative impacts of tightened financial conditions and uncertainties due to conflicts in Ukraine and the Middle East. The U.S. economy saw positive growth in Q2 2024, expanding by 3% year-over-year due to strong personal consumption. Other developed economies also posted relatively favorable GDP growth rates, such as Canada (2.8%), Spain (2.9%), and the United Kingdom (0.6%).
Meanwhile, emerging market economies showed significant variations in growth rates: Brazil (2.8%), India (7.8%), and Indonesia (5.05%) achieved solid results, whereas Mexico (1.7%) saw a slowdown in growth. In China, robust exports spurred industrial production, though consumer demand remained subdued, and the real estate sector continued to experience adjustments.
Inflation in several major economies is trending downward. (Source: OECD)
International Monetary Fund (IMF)
According to the October 2024 World Economic Outlook Update by the IMF, global economic growth in 2024 is projected at 3.2%, unchanged from the July 2024 forecast. The growth gap among economies has gradually narrowed since early 2024, as cyclical factors have eased and economic activity approaches potential levels. In the United States, growth has slowed due to declining consumption and negative impacts from net trade. Japan faces negative growth, impacted by temporary supply disruptions from the closure of a major automotive plant at the start of 2024. Meanwhile, the European economy shows signs of recovery, with improvements in the service sector. In China, increased domestic consumption has driven positive growth momentum in the early months of the year.
United Nations (UN)
In its September 2024 World Economic Situation and Prospects report, the UN projects global economic growth of 2.7% for 2024, an upward revision of 0.3 percentage points from the January 2024 forecast, supported by better-than-expected economic performance in the U.S. and improved short-term growth prospects in other major economies, especially Brazil, India, and the United Kingdom. Economic growth in the European Union is forecasted at 1.0% in 2024, down 0.2 percentage points from the January forecast due to weaker-than-expected growth in Germany, impacted by subdued domestic demand and a prolonged downturn in the manufacturing sector.
Assessment of Global Growth in 2023-2024 by International Organizations
Economic and Political Landscape Amid Global Turmoil
Global growth has been adversely impacted by broadly tight fiscal and monetary policies, unfavorable geopolitical factors, and increasing economic fragmentation.
Fiscal and Monetary Policy
The global financial market has shown remarkable resilience after a prolonged period of tight monetary policy, though considerable risks remain. According to the latest IMF report (2024), many asset classes may face repricing risks as expectations for future interest rate cuts become more likely, albeit with uncertainty around the scale and timing of policy rate changes.
OECD data shows that household borrowing costs in developed economies increased to 4.5% of disposable income in Q4 2023, up from 4.2% in Q3 2023 and 1.6% in 2019 (OECD, 2024). Risks are particularly high in countries with high variable mortgage rates, such as Australia, Canada, Finland, and Poland.
Corporate Debt and Rising Bankruptcy Rates
The corporate sector also faces growing pressures. According to S&P Global’s 2024 report, around 35% of corporate debt in developed economies is set to mature by 2026, up from the previously reported 30%. Non-financial corporate borrowing costs in developed economies rose to 16.2% of operating surplus in Q4 2023, up from 15.1% in Q3 2023 and 9% in 2019. Corporate bankruptcies continue to rise, surpassing pre-pandemic levels in many countries. Global corporate bankruptcies are expected to increase by 9% in 2024, with particularly high increases in North America and Europe.
Another risk lies in the potential impact of sustained high real interest rates, which could intensify the debt burden when low-interest debt is refinanced, or when fixed-rate loans are renegotiated. Some sectors, especially commercial real estate, continue to struggle; corporate bankruptcies and defaults are now above pre-pandemic levels in some countries, posing risks to financial stability.
Geopolitical Risks
Geopolitical risks remain a significant threat to the global economy in 2024, particularly amid escalating conflicts in the Middle East, which have caused disruptions in energy and financial markets.
With heightened tensions between Israel and Iran, the Middle East remains volatile in 2024. Observers are particularly concerned about potential instability in the Strait of Hormuz – the “lifeline” of the world’s oil. About 30% of global oil and 20% of liquefied natural gas are transported through the Strait, a vital route for shipping oil from the Middle East to Asian, European, and North American markets. While conflicts may not fully block energy flows through the Strait, even short-term disruptions could have significant impacts on global energy markets.
The effects of rising conflicts in the Middle East and energy price spikes could amplify consequences if transportation costs continue to rise, affecting goods prices. For example, damage to tankers passing through the Strait of Hormuz would cause significant disruptions in an already tight supply-demand balance in the global tanker market. This would exacerbate shipping cost increases and delay crude oil supplies, even if tankers continue to pass through the Strait. Additionally, if shipping through the Red Sea faces added risks, more vessels may opt for the longer route via the Cape of Good Hope, increasing pressures on overall growth and supply chain stability.
Global Economic Fragmentation
A key factor is the expansion of the BRICS bloc and the continued U.S. sanctions on countries like Russia and Iran. These developments have impacted globalization, altered the international economic and political landscape, and hindered economic growth for many involved nations. The expansion of BRICS, comprising Brazil, Russia, India, China, and South Africa, has drawn significant international attention. BRICS expansion represents a challenge to the current Western-led global economic order. The BRICS group aims to establish a multipolar economic system where emerging economies have a stronger voice in global issues.
The ongoing U.S. sanctions against Russia and Iran have significantly contributed to global economic fragmentation. These sanctions have forced targeted countries to seek alternative trade and financial partners, leading to the formation of new economic blocs and alternative trade channels.
For Russia, sanctions following the Russia-Ukraine conflict have strengthened its economic ties with China and other BRICS nations. Russia-China trade has increased significantly since 2022, with China becoming Russia's largest trading partner. This has not only helped Russia mitigate the impact of sanctions but also fostered the development of a parallel economic system that relies less on the USD and Western financial institutions.
Similarly, Iran, facing longstanding U.S. sanctions, has sought alternative trade partners and developed new financial mechanisms to bypass restrictions. Iran has strengthened economic ties with China, Russia, and neighboring countries, and is promoting the use of local currencies in bilateral trade to reduce reliance on the USD-based international financial system.
Donald Trump’s Reelection Could Trigger Major Global Economic Shifts
The election outcome may lead to significant policy shifts and have far-reaching effects not only on the U.S. economy but also globally. If reelected, President Donald Trump is expected to alter policies on taxes, public spending, business regulations, and trade. These decisions could directly impact consumer and investor confidence, affecting economic growth, the labor market, inflation, global financial markets, and influence policy adjustments in various countries.
Specifically, Trump’s focus on protecting domestic manufacturing and encouraging investment in U.S. production will likely bring changes such as higher import tariffs, reduced corporate income taxes, and new policies on FDI and Fed intervention. These changes will affect sectors like import-export, FDI, and exchange rates. Trump’s victory has already sparked a surge in stocks and cryptocurrencies, but experts caution that global economic challenges lie ahead in the medium term. Trump’s policies are expected to raise U.S. inflation in the short term, impacting the strength of the dollar and other economic sectors.
Trump’s election, with a business-friendly tax cut agenda, has quickly benefited the U.S. stock market. S&P 500 futures rose by 1% before the opening session on November 6, while the Russell 2000 index – representing U.S. small and medium-sized businesses – was projected to rise over 2%. Small businesses stand to gain most from promised corporate tax cuts. In Asia, Japan’s Nikkei 225 closed up 2.61% on November 6, driven by exporter optimism. European markets opened in the green as well, with France’s CAC 40 up 1.75% early in the session, and London and Frankfurt indexes increasing by 0.9% and 0.8%, respectively.
However, investor optimism may be short-lived. Reuters reports that if Trump enacts even a portion of his campaign promises – trade tariff hikes, regulatory easing, increased oil drilling, and higher demands on NATO allies – the resulting pressures on government finances, inflation, economic growth, and interest rates would ripple across the globe.
Meanwhile, China is not only monitoring the U.S. presidential election but is also preparing contingency plans. According to Reuters, Chinese officials are considering a bond issuance of over 10 trillion yuan (about $1.4 trillion) to stimulate the economy. Experts believe that Trump’s reelection could lead to an even larger stimulus package, as Beijing anticipates continued economic pressures from Trump’s policies, including tariff hikes and tech sanctions aimed at restraining China’s rise.
Trump has criticized U.S. support for Kyiv in the Russia-Ukraine conflict and vowed to end the war if reelected. While it’s unclear how he would achieve this, he has suggested that Ukraine may need to cede territory to reach a peace deal, an idea Kyiv has consistently rejected. Under a new administration, the U.S. may also fundamentally reconsider NATO’s purpose and mission. Additionally, there’s a chance the U.S. would continue efforts to normalize relations between Israel and Saudi Arabia, a priority in Trump’s previous term.
High Fed interest rates and cheaper borrowing costs elsewhere are likely to boost the dollar’s value, posing further challenges for emerging markets since over 60% of international debt is in dollars. Mexico could be among the hardest-hit due to Trump’s border closure rhetoric, coinciding with a worsening domestic outlook. For emerging markets dependent on USD funding, such policies would make borrowing costlier, dealing a double blow to export losses. As the world’s largest exporter, China is particularly reliant on growth recovery and may seek new markets for products barred from the U.S., especially targeting Europe.
Governments around the world are now seeking solutions to adapt to U.S. policy changes following Trump’s reelection. Trump’s victory raises more questions than answers, and the world may enter uncharted territory, forcing investors to stay agile and ready to seize opportunities in 2025.
Source: GSO, OECD, IMF, UN, FR, tapchinganhang, VNExpress, VNEconomy
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