Global economic review
Following a period of uncertainty regarding global economic growth and prospects, the World Bank—Global Economic Prospects Report (June 2024) projected that global growth would hold steady at 2.6 percent in 2024 and increase marginally to 2.7 percent in 2025.
Furthermore, the World Bank reports that Emerging Market and Developing Economies (EMDEs) are forecasted to decline from 4.2 percent in 2023 to 4.0 percent in 2024, representing a 0.2 percent fall.
According to the World Bank— Global Economic Prospects Report (June 2024), the prospect of ongoing regional conflicts remains a significant risk to many vulnerable economies, and some will be poorer in 2024 than in the period leading up to the pandemic in 2020.
The World Bank note that ongoing regional geopolitical conflicts and rising tensions may result in continued volatility within commodity markets leading to price volatility. Furthermore, the report outlines that other risks include weaker-than-anticipated activity in key economies and disasters related to climate change. Consequently, the report by the World Bank outlines that policy makers face significant challenges and that governments across the globe should work together to safeguard trade, support green and digital transitions, deliver debt relief and improve food security.
The graph below, based on data from the World Bank, outlines forecasted real GDP growth across Advanced Economies, Emerging Markets and Developing Economies.
Source: World Bank Economic Prospects, June 2024
Global inflation
According to the World Bank— Global Economic Prospects Report (June 2024), global inflation is expected to moderate at a slower pace and average 3.5 percent in 2024. Considering some global improvements, the outlook remains cautious, with several central banks across advanced economies and EMDEs likely to remain cautious in easing policy.
Accordingly, the World Bank sees that markedly higher interest rates, compared to pre-pandemic levels, are set to sustain for an extended period.
The World Bank report also outlines the need for the monetary policies of EMDEs to remain focused on price stability due to persistent inflation risks. Additionally, high debt and elevated debt-servicing costs will require policymakers within EMDEs to balance sizable investment needs with fiscal sustainability. According to the World Bank, policies are necessary to raise productivity growth, improve the efficiency of public investment, build human capital and close gender gaps in the labor market in order to meet development goals.
Purchasing Managers Index (PMI)
The global composite Purchasing Managers Index (PMI) for 2024 has remained above the 50-point mark throughout the year and rose to 53.7 in May 2024 before falling back to 52.5 in July and stood at 52 in September 2024.
Source: IHS Markit/JP Morgan
Commodity prices
The World Bank —Global Economic Prospects Report (October 2024) expects prices to decrease by 5.0 percent in 2025 and 2.0 percent in 2026 after falling back 3.0 percent during 2024 and to their lowest levels since 2020. The projected declines are primarily due to the fall in oil prices but offset by price increases for natural gas and a stable outlook for the price of metals.
As the World Bank report outlines, the Brent crude oil price is projected to average USD 80/ bbl in 2024 before falling back to USD 73/ bbl in 2025 and lowering to USD 72/ bbl in 2026. The annual average oil price is expected to fall for the fourth consecutive year through 2026 and reach marginally above the 2021 level.
However, the same World Bank report outlines that the ongoing possibility of escalating conflict in the Middle East represents a substantial risk to energy prices. Also, falling global oil demand, mostly from within the Chinese economy, as well as diversifying oil production and ample oil supply capacity held by OPEC+, remain downside risks to oil prices.
Outlined below is data from both the IMF and the World Bank, which outlines the forecasted commodity price index during the period 2024 to 2027, with prices forecasted to stabilize at similar levels seen in 2021, following a spike in prices witnessed in 2022.
Source: IMF, World Economic Outlook Database, October 2024
Source: World Bank Economic Prospects, June 2024
Energy
According to the World Bank— Commodity Markets Outlook Report (October 2024), it is noted that the energy price index is projected to decline by 6.0 percent during 2024 (y/y). Furthermore, the energy price index is projected to decline by a further 6.0 percent in 2025, with a decline of 2.0 percent projected in 2026.
The World Bank outlines that the forecast is based on no further escalation of regional conflicts and that the outlook for global economic growth remains stable, with oil supply from non-OPEC+ producers steadily expanding. Furthermore, the World Bank outlook is based on the OPEC+ countries maintaining spare capacity and delaying the reversal of supply cuts.
As outlined by recent IMF data, the graph below illustrates how energy prices have continued to plateau during 2024 at similar levels seen in 2021, following price increases in 2022.
Source: IMF Primary Commodity Prices
Oil
According to the recent World Bank Commodity Markets Outlook Report (October 2024), the global oil supply could reach approximately 105 mb/d in 2025. The World Bank outlines that countries such as Brazil, Canada, Guyana and the US will drive such growth.
The same report from the World Bank outlines that global oil consumption is forecasted to rise by about 1 mb/d per year from 2024 to 2025, representing an annual growth rate below 1.0 percent. Consequently, the World Bank outlines that this would represent a significant slowdown from an increase of 2 mb/d in 2023, continuing a global deceleration in the oil demand. It is worth noting that the World Bank outlines that between 2015 and 2019, the growth of global oil consumption averaged 1.4 percent. As a result, the World Bank projects global oil supply to exceed demand by an average of 1.2 mb/d in 2025.
The World Bank outlined that the economies of China and India make up almost 50 percent of the increase projected in 2025, with demand from within advanced economies due to fall, albeit marginally. Looking further towards 2026, the World Bank outlines that global oil consumption growth is expected to be mostly unchanged in comparison to 2024 and 2025.
The graph below, based on data from OPEC, illustrates how oil prices in 2024 started at USD 80/bbl in January, reached USD 89.10/bbl in April, and dropped back to USD 73.58 in September 2024.
Source : OPEC
source: OPEC 2024 World Oil Outlook 2045
Natural gas and coal
As outlined by the World Bank —Commodity Market Outlook Report (October 2024), the European natural gas benchmark is projected to be lower in 2024 by an average of 18.0 percent when compared to 2023 prices; the same report outlines that natural gas prices in Europe are expected to increase by 7.0 percent in 2025 (y/y) and then fall back in 2026 by a marginally more significant percentage as supply increases. According to the Report, the price of natural gas in the US is expected to decline in 2024 due to increased production and supplies across the country. However, the price of natural gas in the US market is expected to rise in 2025 and 2026 as new infrastructure allows US exports to increasingly serve growing global demand, generating upward pressure on domestic prices. With respect to the price of coal, it is expected to fall as the global demand falls.
Metals
As outlined in the recent World Bank—Commodity Market Outlook Report (October 2024), the price index of metals is projected to decline in 2025 and 2026. In 2024, the price index increased by 6.0 percent (y/y). The World Bank Report outlines that after a 10.0 percent drop in the price is expected to decline further in 2025 and 2026 due to an increase in output by major producers in addition to a decline in the number of new facilities commencing production.
The graph below shows that iron prices are forecasted to fall in 2024, with copper prices and aluminum prices expected to rise, albeit marginally.
Source: IMF, World Economic Outlook Database, October 2024
Global economic risks
Source: Economic Policy Uncertainty
Major economic risks
According to the World Bank—Global Economic Prospects Report (June 2024), global inflation is expected to moderate slowly and average 3.5 percent in 2024. Considering some global improvements, the outlook remains cautious, with several central banks across advanced economies and EMDEs likely to stay cautious in easing policy. Accordingly, the World Bank sees that markedly higher interest rates, compared to pre-pandemic levels, are set to sustain for an extended period.
Extreme weather caused by climate change will require governments to renew and increase their commitment to reduce their countries’ emissions and assist those countries most affected by adverse weather but without the financial means to combat the risk and respond to events. A continued focus will be placed on the oil, gas, airline and automotive industries, in addition to the food industry, as this will remain a prevailing risk in 2025 and beyond.
Geopolitical conflicts continue to be a significant risk to global economies, with ongoing conflicts threatening the stability of markets. There also remains a risk to global stability if conflicts were to escalate beyond specific regions.
Climate change, pollution, deforestation and habitat loss contribute to biodiversity loss. This risk threatens global ecosystems, affects livelihoods, food supplies and income, and may lead to disease outbreaks.
With new technologies reshaping economies and the drive towards artificial intelligence, autonomous vehicles and drones, the digital world will be vulnerable to cyberattacks. This is already seen with critical infrastructure (energy, healthcare and transportation) and geopolitical and economic uncertainties due to a lack of suitable governance.
Trade tension between the US and many leading global economies will continue to pose a risk in 2025.
Natural disasters can be preventable; solutions such as reforestation, education, technology governance and economic support could help mitigate and reduce the risks caused by global warming, pollution and mining.