World Economic Prospects
Each month Oxford Economics’ team of 300 economists updates our baseline forecast for 200 countries using our Global Economic Model, the only fully integrated economic forecasting framework of its kind. Below is a summary of our analysis on the latest economic developments, and headline forecasts. To access the full report (and much more), request a free trial today.
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The global recovery will be steady but unspectacular
- The world economy remains on track to grow at a steady pace through H2 this year and into 2025. While growth will be unexceptional, we think concerns that a US recession could push the world economy on to a weaker growth trajectory are misplaced. Our world GDP growth forecasts are unchanged at 2.6% in 2024 and 2.8% in 2025.
- US GDP growth slowed sharply at the start of 2024 and somewhat underperformed economists’ expectations. But this doesn’t imply that the economy is teetering on the brink of recession. After a robust H2 2023, some slowdown isn’t an automatic cause for concern because growth in excess of the potential rate cannot continue indefinitely. Indeed, the Federal Reserve’s goal for the past couple of years has been to bring growth down closer to trend to help contain underlying inflationary pressures.
- Outright falls in activity would be cause for concern. However, it is the recent soft US data that is painting the most pessimistic picture and these indicators have done a poor job at predicting growth in recent years. Meanwhile, the softening labour market partly reflects new entrants to the labour force, rather than large-scale job losses. Reassuringly, the more reliable hard economic data have been more resilient and remain consistent with a relatively soft economic landing.
- The US’s weak start to the year was offset by more robust Chinese growth, which reflected strong rises in exports and inventories. But domestic sentiment is still weak and a further major ramp up of policy support is unlikely, so a return to more moderate growth is probable from Q2. Without further policy support, we expect growth to undershoot the government’s 2024 target of 5%.
- Overall, the likely soft performance of world GDP growth in Q2 was likely to have been payback for Q1’s strength. In H2, we believe global growth will pick up gradually. Given this and ongoing signs that underlying inflation pressures are moderating, we expect central banks in key advanced economies to slowly lower rates from here. We continue to expect the Fed will begin its cautious rate cutting cycle in September.
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