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Global Category Intelligence

Q2 2025

Global Economic Outlook 2024-2025: Slowdown Amidst Stabilization and Uncertainty

In 2024 the global economy is expected to grow slowly for the second consecutive year. This is primarily due to the impact of high interest rates in most major economies and weakening growth in China. However, this follows global growth outperforming expectations in 2023, withstanding numerous headwinds and ongoing global geopolitical tensions.

Amidst the slowdown, the global economy is anticipated to experience gradual stabilization of economic conditions, notably in the second half of 2024, with expectations of inflation easing and monetary policy loosening, supporting growth momentum moving into 2025.

Global real GDP growth is forecast to reach 2.7% in 2024 and 3.1% in 2025. Global inflation is also expected to fall to 5.4% in 2024 and 3.6% in 2025.

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

Advanced economies will face a slowdown of real GDP growth from 1.5% in 2023 to an expected 1.3% in 2024. The outlook has improved considerably for the US economy following the growing likelihood of a soft landing. In this scenario, rising interest rates will bring down inflation without causing a recession. Meanwhile, other advanced economies saw their outlook deteriorate.

The US economy was resilient throughout 2023, avoiding a recession and maintaining growth momentum despite the impact of high interest rates. The dampening effect of tight monetary policy will continue to be offset, at least partly, by persistent labor market strength and resilient consumer spending in 2024. Growth momentum is expected to accelerate in the year's second half as inflation eases and interest rates fall, leading to increased real GDP growth in 2025 of 1.7%.

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

Following a considerable slowdown in 2023, the bloc will record a minimal recovery in 2024, recording an anticipated 0.8% real GDP growth. Slow growth is primarily due to the combined impact of elevated inflation and tight monetary policy dampening demand. Yet, growth momentum is expected to accelerate in the second half of 2024, driven by resilient employment, rising real incomes, falling interest rates, and a recovery in foreign demand. This will support stronger growth in 2025, which is expected to be 1.5%.

Rising economies in Asia Pacific will 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. This group has an increasingly diverse picture, with China weakening while India and numerous Southeast Asian economies are surging, 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, with the downward trend in growth continuing in 2025 at 4.3%. China faces several economic challenges, most notably due to its real estate sector. Concerns and low confidence among consumers and businesses, alongside subdued investment, increase the economic risks associated with deflation. Growth comes under further pressure due to declining foreign direct investment in China as rising geopolitical tensions impact economic activity.

Emerging and developing economies are driving global growth and defying the 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 are anticipated to experience accelerating growth momentum in 2025.

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

The implications of escalating geopolitical tensions, economic diversification, and the growing fragmentation of the global economy could contribute to higher costs and reduced access to markets. At the same time, consumers experience higher prices and reduced choice.

Worsening global fragmentation could impact growth via trade, investment, commodity prices, and productivity channels. Under this scenario, most markets in both advanced and developing worlds will face slower growth potential, with trade-dependent economies hitting the hardest and more price volatility in the medium and long term.

Global inflation will see a 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%.

The slowdown of global inflation will be driven by the ongoing economic normalization following the economic disruptions in recent years. In addition, high interest rates will slow economic activity, reduce demand, and soften labor markets. Yet, following a significant decline in global inflation in the second half of 2023, moderation is expected to slow in 2024, given a more persistent underlying measure of inflation excluding food and energy. In 2025, global inflation is set to decline notably to 3.6%.

Key Takeaways

The global economy will grow slowly for the second consecutive year in 2024, which can be attributed to high interest rates and weakening growth in China.
Gradual stabilization is anticipated in the second half of 2024, with inflation easing and monetary policy loosening.
Forecasted global real GDP growth at 2.7% in 2024 and 3.1% in 2025, with global inflation expected to fall to 5.4% in 2024 and 3.6% in 2025.
Advanced economies face a slowdown in real GDP growth, particularly in the Eurozone, while the US economy sees a soft landing with growth momentum expected to accelerate in 2025.
Rising economies in Asia Pacific, including India, Indonesia, the Philippines, and Vietnam, to drive global growth amidst China's slowdown.
Ongoing uncertainties due to the COVID-19 pandemic and the war in Ukraine, leading to a volatile economic environment and emphasizing the importance of scenario planning.
A continued decline in global inflation is expected in 2024, driven by economic normalization and high interest rates, with a notable decrease forecasted for 2025.