The global economy is projected to maintain a steady pace of growth in 2024, supported by a resilient U.S. economy and anticipated interest rate cuts from major central banks, according to a recent Reuters poll of 500 economists. Despite looming uncertainties from the upcoming U.S. presidential election, economists have upgraded their 2024 growth outlook for the world economy to 3.0%, citing robust consumer spending in the United States as a key driver of this sustained expansion.
U.S. Economy Leads Global Growth Momentum
The United States has consistently exceeded expectations this year, with GDP growth currently at 2.8%, nearly twice the initial forecasts for 2023. According to Ross Walker, head of global economics at Natwest Markets, “there’s still a U.S. outperformance theme,” particularly when compared with the slower growth expected in the eurozone and the UK. The U.S. economy’s resilience, marked by strong consumer demand and near-record stock market highs, has helped drive an unexpected upgrade to the world’s growth forecast, which economists initially pegged at 2.6% in January.
For 2024, the U.S. is projected to grow at an average rate of 2.6%, outpacing G10 peers and contributing significantly to global economic stability. This performance is expected to continue into 2025, although at a slightly slower rate of 1.9%. Even with high interest rates, the U.S. labor market remains strong, making it one of the few major economies that may not need aggressive interest rate cuts in the near term.
Asia’s Growth Engine Powers Global Outlook
Outside the U.S., Asia remains a key growth region. India leads as the fastest-growing major economy, while Japan has recently shown enough economic momentum to begin unwinding its longstanding ultra-loose monetary policy. Meanwhile, China, the world’s second-largest economy, faces headwinds and has turned to aggressive monetary and fiscal stimulus — including a $1.4 trillion package — to meet its 5% growth target. Economists believe that with this substantial support, China will likely achieve its growth objectives, though its economy still lags pre-pandemic performance levels.
While most countries worldwide are gradually reducing interest rates to stimulate growth, many expect further cuts, reinforcing a generally optimistic outlook. In a Reuters survey, 147 out of 255 respondents suggested central bank rates are more likely to end lower by 2025, enhancing economic growth across several regions.
The U.S. Election: A Potential Game-Changer for Global Trade and Inflation
One factor that could impact global economic projections is the outcome of the upcoming U.S. presidential election. Should Republican candidate Donald Trump secure victory, he has proposed broad tariffs on imports from all countries, which economists warn could significantly affect U.S. economic growth. Morgan Stanley economists suggest these policies could trigger a “delayed drag of -1.4%” on U.S. GDP growth, primarily through reduced consumer spending, business investment, and job growth, while also raising inflation by an estimated 0.9%.
In the same Reuters survey, 39 out of 42 economists expect Trump’s proposed tariffs to be more inflationary than those proposed by his opponent, Democratic candidate Kamala Harris. Given the United States’ significant share of global trade, Trump’s proposed tariffs could ripple through international markets, impacting both inflation and growth globally.
Inflation and Interest Rate Expectations Remain Mixed
While inflation has cooled considerably across major economies, most countries are expected to continue lowering interest rates. In the United States, however, two-thirds of surveyed economists anticipate the federal funds rate could rise further in response to strong economic performance and potential inflationary pressures. Walker from Natwest highlights the U.S. labor market as a reason for caution, stating that the U.S. is the “one least in need of aggressive interest rate cuts,” as inflation rates now hover near the Federal Reserve’s 2% target.
The outlook for 2024 suggests a resilient global economy, buoyed by strong performances from the U.S. and Asia. However, uncertainties surrounding the U.S. election and potential tariff policies could introduce new inflationary pressures and challenge growth in key markets. As central banks weigh their next moves, investors and policymakers alike will closely monitor the evolving dynamics in the U.S., especially as both candidates present policies likely to drive up an already elevated fiscal deficit. With resilient economies in place, global growth is expected to remain steady, although political developments could lead to new economic headwinds.
