Economy
The latest updates on world economy, in 5 charts
Summary
The global economy is expected to record steady growth in 2024, led by the Asian emerging economies, while European giants are likely to be worst performing among G20 nations. On similar lines, a divergence in monetary policies is also visible now.Every month, Mint’s Plain Facts section brings out an update on key global economic data to thread together the biggest developments in the world that are worth paying attention to. The accompanying analysis and charts explain how each story is creating ripples on the global stage, where it is headed in the coming weeks, and whether it can impact India.
This time, we explain how monetary policies have diverged around the world and why the debt situation has become a reminder of the Napoleonic Wars.
1. GDP divide
The global economy witnessed a slowdown in 2023 and some countries even had recession knocking on their doors. The trajectory is likely to hold steady in 2024—which means it will still be weaker than the pre-pandemic trend, the Organisation for Economic Co-operation and Development (OECD) said in its latest Economic Outlook.
Growth will be led mainly by Asian emerging markets India, Indonesia and China, while the UK and Germany, whose economies shrank at least once in 2023, are likely to record a mere 0.4% and 0.2% growth in 2024.
Among G20 nations, only Saudi Arabia and Argentina have worse forecasts. On one hand, the global economy is proving resilient to tight monetary policy, inflation is showing signs of easing, and economic risks are receding, but the sustained signs of slowdown need macroeconomic efforts by policymakers across the world—from prudent monetary policy to investment- and jobs-focused reforms, the OECD said.
2. Policy progress
During the pandemic, central banks globally had delivered coordinated interest rate cuts, but are now diverging on their policy response to suit their macroeconomic situation.
Japan recently hiked its interest rate for the first time in 17 years and is now showing an inclination towards more hikes. On the other hand, Sweden has cut its interest rate, breaking a tradition of doing so before the US.
The US, which sets the tone for monetary policies around the world, has had a mixed trajectory of signalling rate cuts and status quo in the past few months as its inflation still exceeds the Federal Reserve’s 2% target.
The UK has also maintained a status quo but has signalled a rate cut in June, depending on how inflation data plays out. If the UK does so, it would be the first major European country to diverge from the Fed.
The divergence is understandable as these countries are seeing varying degrees of economic growth and inflation.
Also Read: Central banks are marching to different beats again—and that’s good news
3. Debt crisis
Even as the world has recovered from the scars of the covid-19 pandemic, debt levels have remained high, at 111% of GDP in advanced economies and 69% in emerging and developing economies.
This is due to high government spending to support growth and keep food and energy prices in check amid geopolitical tension, with four countries at war currently.
Expressing worry over the high debt levels, Borge Brende, president of the World Economic Forum, told CNBC, “We haven’t seen this kind of debt since the Napoleonic Wars, we are getting close to 100% of the global GDP in debt."
The elevated level of debt indicates the countries’ inability to rein in their spending amid slow economic growth prospects and persistent inflationary pressures.
According to the International Monetary Fund, “building a credible fiscal framework could guide the process to balance spending needs with debt sustainability".
4. Dodging damage
During the pandemic, AstraZeneca’s covid-19 vaccine—produced in India by the Serum Institute of India under the brand name Covishield—was deemed safe and was used worldwide. But last month, the company admitted that its covid-19 vaccine, Vaxzevria, could cause rare blood clots.
Two weeks later, on 8 May, it announced that it was withdrawing the jab globally. However, the events did not have much impact on its share price, which rose 0.8% on 9 May and has risen 13.5% this year as the company saw strong profit in the March quarter with strong sales of its cancer drugs.
Despite the withdrawal, which the company has attributed to the “surplus of available updated vaccines", it continues to face legal troubles from the class action lawsuit involving over 50 cases seeking damages up to 100 million pounds filed in the UK over allegations that the vaccine caused fatalities and severe injuries in numerous instances.
5. Rising heat
The signs of global warming are becoming more obvious with each passing day as temperatures are consistently higher compared to the pre-industrial reference period of 1850-1900.
According to the latest report by Copernicus Climate Change Services, April 2024 was 1.58 degrees Celsius warmer than an estimate of the April average for 1850-1900, making it the hottest April on record.
In fact, the global average temperature for the past 12 months is also the highest on record, at 1.61 degrees Celsius above the 1850-1900 average. The rising temperature has already caused several issues from heatwaves to forest fires to low food production.
India faced heatwaves to severe heatwaves during the month, while countries like Thailand and Mexico also saw extreme weather, according to the World Meteorological Organization. While the effects of the El Nino phenomenon, which leads to low rainfall, are expected to fade this year, the concentration of greenhouse gases will keep pushing the temperature up.
