Global macroeconomic forecasts

Geopolitical risks present the most important influence on the global macroeconomic outlook. According to the Economist Intelligence Unit (EIU) forecasts, the immediate risk of a global recession is low and diminishing. This is mainly due to the good state of the US economy. Economic conditions in Europe and China are not as strong, however both markets are growing. World economic growth is forecast to be 2.4 % this year according to the EIU, which is a good outcome in a context of high interest rates. Economic growth over the next four years, which is expected to be around 2.7 %, is not so promising, as trade barriers, the impact of climate change and technological progress in advanced economies will constrain growth in emerging and developing countries.

Although the worst of the high cost-of-living crisis is over, inflation is not projected to return to the low levels of the pre-pandemic period. Tightening labour market conditions, reshaping supply chains and the impact of unpredictable weather on agriculture will put upward pressure on prices. Inflation in developed markets is projected to average 2.5 % in 2024 and 2,1 % on average per year in the next five years (up from 1.5 per cent in 2010).

Economic policy measures to boost GDP growth are limited. As inflation in the US remains high this year, the lowering of US interest rates will only start in the third quarter of this year. In Europe, interest rates are expected to be cut earlier, but inflation in both the EU and the US will constrain faster rate cuts. On the fiscal side, high borrowing costs and rising defence spending will drive the consolidation of public finances.

The strong US economy and high interest rates will keep the US dollar strong, at least in this and the next year. In the absence of serious alternatives to the dollar, initiatives to end dollarisation will find be difficult to implement.

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