After the strong post-pandemic rebound, the global economy experienced a sharp slowdown in growth in 2022 and 2023. The situation now seems to be stabilising. Nevertheless, growth remains very uneven across countries and inflation control remains fragile. On the other hand, geopolitical tensions are tending to increase, at the same time as their influence on the organisation of supply chains is becoming increasingly important.
On the occasion of the update of its economic forecasts last June, the World Bank revised the growth expected for the current year slightly upwards. Global GDP is expected to grow by 2.6% in 2024, putting an end to three years of growth erosion. The World Bank nevertheless points out that this figure remains "well below the average of 3.1% recorded in the decade preceding the Covid-19 pandemic". In 2025 and 2026, the growth rate is expected to remain fairly stable at 2.7%.
The IMF, the OECD and the European Central Bank are a little more optimistic, with growth forecasts exceeding 3% in 2024 and 2025.
*Estimate; **Forecast – Data source: World Bank, June 2023.
The GDP growth forecast for advanced economies has risen from 1.2% to 1.5% for 2024, and from 1.6% to 1.7% for 2025, according to World Bank data. The United States retains a leading role, with a GDP increase estimated at 2.5% in 2024 (as in 2023, then at 1.8% in the two following years. At the same time, the Eurozone will have to settle for a 0.7% increase in 2024, then 1.4% and 1% in 2025 and 2026. These forecasts are roughly in line with those published in May by the European Commission, which projects an increase of 0.8% in 2024 and 1.4% in 2025. Japan is expected to match the Eurozone in 2024 and then see slower growth in the following two years (1% in 2024 and 0.9% in 2026).
Across developing economies, growth is expected to decelerate slightly compared to 2023, averaging 4% in 2024-25. “It is expected to accelerate in low-income countries, reaching 5% in 2024, up from 3.8% in 2023. In 75% of them, however, the growth prospects for 2024 have been revised downwards compared to the forecasts made in January,” says the World Bank.
Scrutinized by all observers as it is decisive for global health, Chinese growth is expected to be slightly higher than the average for emerging and developing countries, with GDP growth forecasts standing at 4.8% in 2024, before slowing to reach 4.1% in 2025 and 4.0% in 2026. Three other Asian countries are expected to show significantly higher growth than the global average over this 2024-2026 period, namely India, Bangladesh and Indonesia.
**Forecast – Data Source : World Bank.
According to the World Bank, inflation is following a favorable trend as it is expected to fall to 3.5% in 2024, then 2.9% in 2025. However, in Western economies and particularly in the United States, reaching the target threshold of 2% annual inflation seems particularly difficult. The World Bank's rate cut estimates are also lower than the projections made six months ago, which should lead many central banks to exercise caution before lowering key interest rates. "Global interest rates are likely to remain high by the standards of recent decades—averaging about 4% over 2025-26, roughly double the 2000-19 average," the World Bank warns. "Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization," confirms the IMF.
Conversely, in China, low inflation reflects economic difficulties that are encouraging households to save, leading to weaker demand.
Data sources : Eurostat, US Labour Department, National Bureau of Statistics of China.
According to the Global Trade Update published by UN Trade and Development (UNCTAD) on July 2, world trade continued in the first quarter of 2024 the growth trend that had begun in the second half of 2023. The value of trade in goods increased by about 1% quarter-on-quarter and that of trade in services by about 1.5%, with estimates pointing to growth of 2% for each of these segments in the second quarter. The report says that if positive trends continue, global trade in 2024 could reach nearly $32 trillion, but is unlikely to exceed the record level of 2022.
Q1 and Q2 2024: estimates - Source: UN Trade and Development.
The upward trend in the first quarter of 2024 was fuelled by positive, but uneven, business momentum. The growth was mainly due to increased exports from China (9% q-o-q), India (7%) and the United States (3%), while exports from Europe stagnated and those from Africa decreased by 5%. Growth therefore appears to vary geographically, but also by type of product. UNCTAD notes a renewed interest in products linked to the energy transition and artificial intelligence. "Demand in some sectors such as electric vehicles, solar panels, batteries, and high-end semiconductors is expected to further increase in many countries” and “the trade of these products may continue growing substantially faster than average”, says the report, but points out that government policies may curb some of these trends.
Globally, over the whole of 2024, world trade is expected to return to growth after the 2023 dip, and the rebound recorded in services is expected to weaken.
The Covid-19 pandemic in 2020, the outbreak of the Russia-Ukraine war in 2022, the resurgence of the Israeli-Palestinian conflict in 2023: three major shocks have shaken the world in 4 years, each time with significant consequences for the organisation of supply chains. These events have brought questions of sovereignty and strategic independence back to the centre stage, leading States to develop new public policies which have an impact on transport flows.
“Heightened geopolitical risks, the need for energy transition toward renewable sources, and significant technological advancements in computing power and artificial intelligence (AI) have led to an increase in government interventions in the economy. Policies such as the United States Inflation Reduction Act, the Made in China 2025 initiative, and the European Union’s Net Zero Industry Act are largely motivated by strategic considerations related to the rapidly evolving environmental, technological, and geopolitical landscape", UNCTAD said.
To reduce their vulnerability, States and businesses first sought to diversify their sources of supply. This may involve relocating part of the production to countries closer to the places of final consumption (nearshoring) and/or to “friendly” countries (friendshoring). This movement brings about substantial changes in trade, even if it is necessarily a fairly long process given the interconnections and complexity of the supply chains. The changing trends in the commercial interdependence of States are a good illustration of the movements underway.
Source : UNCTAD estimates based on national statistics. Note : the dependence of an economy on another is calculated as the ratio of their bilateral trade over the total trade of the dependent economy. Annual change is calculated using a trade-Weighted moving average over the past four quarters. Data for Russian Federation includes estimates.
“The policy interventions currently implemented or considered by many governments take the form of industrial policy From a trade perspective, industrial policy typically seeks import substitution by providing support to domestic producers, imposing restrictions on trade, and facilitating vertical consolidations These types of interventions typically have a negative effect on trade," the UNCTAD report stresses. As a result, the international organisation believes that the outlook for global trade in 2024 remains subject to downside risks.
It also points to a significant risk of increased protectionism, trade costs and uncertainty. "Unilateral actions in the form of industrial policies often distort trade Consequently, trading partners may respond with trade restrictions, escalating protectionism and potentially triggering retaliatory actions that undermine the rulebased global trading system. Weaker international trade rules increase uncertainty in cross-border transactions, add complexity to business strategies, make it challenging to forecast costs and prices, and ultimately raise the costs of expanding into new markets for many firms, especially small and medium enterprises," UNCTAD said. Undoubtedly, this scenario has gained ground in recent months, with an announced increase in customs duties on certain products.
More than ever, in international freight transport, freight rate volatility is strongly correlated with geopolitical hazards. As shipping companies were preparing to weather another financial storm, with the combined effects of a slowdown in demand and a massive influx of capacity, the situation in the Red Sea has reversed the trend and pushed up freight rates, particularly on the Asia-Europe route. Maritime shipping companies should thus save their profitability in 2024, or even improve it slightly (link to article on company profitability). This movement, however, has nothing to do with the post-Covid rebound, which was truly driven by demand and not operational difficulties. In this case, shipping companies are also experiencing a net increase in their operating costs, which suggests a tense bidding season. They will necessarily begin negotiations with shippers on a basis significantly higher than that of 2023.
In air freight transport, the hazards of maritime transport, opportunely combined with growth in cross-border e-commerce which is boosting demand, have enabled freight rates to continue to make a soft landing, having also increased sharply during the post-Covid rebound. Overall, prices are trending lower than in 2023, but the year is better than expected for airlines. They should benefit from a fairly dynamic high season, again fuelled by the disruptions in the Red Sea which are affecting the reliability of maritime transport.
Structurally less volatile, road freight transport is going through a difficult period. As demand weakened, spot rates fell sharply in 2023, and the slight improvement seen in Q2 2024 is yet to be confirmed. The slump is also reflected in contract freight rates, which have been falling since the start of the year, despite the general rise in operating costs for road hauliers. The number of corporate insolvencies is also rising sharply.
At the mid-year point, we can see that the global economy is stabilising, after slowing sharply following the post-Covid rebound. At the same time, we are witnessing the tangible emergence of a new global organisation of flows, guided by a desire on the part of States and businesses to reduce their vulnerability. But this new environment is still very fluid, which complicates the development of strategies to be implemented, aimed at adapting to the situation, both on the part of shippers and carriers.