Though global growth will slow in 2024 as high interest rates percolate through credit channels to the real economy, it will firm in 2025, said Moody’s recently.
Inflation will continue to cool amid slowing demand in 2024 as central banks maintain a tight policy stance, the credit rating agency predicted.
“Absent unanticipated shocks, we expect global growth to firm in 2025,” the firm said.
According to Moody’s, there are several major global growth trends for 2024 and 2025.
The pace of global economic growth will moderate
G-20 growth is expected to fall to 2.1% in 2024 from 2.8% in 2023 and to accelerate to 2.6% in 2025. In advanced G-20 economies, growth will decelerate to just 1.0% in 2024 from 1.7% in 2023, before returning to 1.8% in 2025.
Growth in G-20 emerging markets will slow to 3.7% in 2024 from 4.3% in 2023, followed by 3.8% in 2025.
Economic slowdown will be uneven
US (Aaa stable) growth remains robust but will moderate in 2024.
The euro area has been hit harder in 2023 and its growth will remain subdued in 2024.
China 's (A1 stable) economy is set to meet its 5% growth target in 2023 and a downshift to 4% is estimated in 2024 and 2025.
Some large emerging market (EM) economies such as India (Baa3 stable), Mexico (Baa2 stable) and Indonesia (Baa2 stable), have displayed remarkable resilience, while the outlook is more complicated in South Africa (Ba2 stable), Türkiye (B3 stable) and Argentina (Ca stable).
Recent run-up in bond yields will partially reverse
Bond yields have been driven higher by the rise in term premium and to some extent market technicals.
US 10-year yields are expected to ease to their long-term equilibrium of around 4% in 2024, as falling growth and inflation bring rate cuts in sight.
Policy rates have peaked for major central banks, with inflation on a receding trend.
Inflation will continue to retreat
Headline and core inflation rates have retreated from 2022 peaks in advanced and EM economies.
Inflation is expected to fall back to target in most G-20 economies by year-end 2025.
Climate or geopolitical events could inject volatility from spikes in energy and food prices.
New price shocks, geopolitical shifts and lingering rate effects are key risks
There are three broad but related types of risk: energy or food price shocks could cause inflation to rebound; geopolitical, cyber and climate risks add uncertainty to the outlook; and high interest rates could weaken economic strength and financial stability more than expected.
The conflict in Israel and Gaza is a source of economic and geopolitical risks. The military conflict between Russia and Ukraine is another source of uncertainty.
