Global Economic Outlook: Inflation, Growth, and Challenges Ahead | Image Source: Pexels.com
NEW YORK, December 2024 - The global economic landscape of KPMG by December 2024 reveals a complex global economic landscape of geopolitical tensions, fluctuations in inflation and changes in growth patterns. While central banks have taken decisive steps to stabilize the economy, challenges such as inflationary pressures, post-pandemic fiscal adjustments and trade conflicts remain. Despite these obstacles, the table suggests cautious optimism for a more stable trajectory by 2026.
World growth is expected to slow slightly from 3.2 per cent in 2023 to 3.1 per cent in 2024, and a slight improvement is expected in 2025 to 3.2 per cent. However, the 2026 forecast indicates a 3.0% slowdown due to the impact of post-election fiscal policies in the United States. The forecasts highlight the ongoing struggle to return to prepandemic growth levels, which averaged 3.6% per year between 2000 and 2019. According to Ben Shoesmith, Chief Economist of KPMG in the United States, “delays in the effects of monetary policy will push the influence of price reductions in the second half of 2025 and 2026, creating a tailwind for consumer purchases and large commercial investments.”
Inflation remains a critical approach. The report indicates that inflation, which reached 6.1 per cent in 2023, is expected to reach 4.5 per cent in 2024 and to continue its downward trajectory up to 3.5 per cent in 2025 and 3.2 per cent in 2026. Factors contributing to this decline include lower energy prices, slower growth and lower excess supply. However, wage-induced inflation in Europe and inflation in the services sector remain of concern. Regina Major, Global Director of Clients and Markets at KPMG International, highlighted the resilience needed to meet these challenges.
“KPMG’s World Economic Outlook reflects the uncertainty the world is facing today, but also underscores the desire of many nations to return to a more stable path through collaboration and determination
Geopolitical tensions, particularly around trade and tariffs, further complicate economic prospects. The report notes that inflationary trade policies and post-US immigration measures could slow down the rate of credit relief. Any significant change in U.S. tariff policies can lead to reprisals, amplify global economic uncertainty. Central banks, excluding the Bank of Japan, have already started tariff cuts to boost growth. However, the effects of these measures remain uneven and countries such as Russia and Turkey expect them to face prolonged inflationary pressures.
The changing economic landscape is also ready to influence mergers and acquisitions. With private equity companies with record dry dust levels and loan costs expected to decrease, the M & A activity is likely to rebound. However, increased regulatory uncertainty and protectionist measures could limit the scope and scope of cross-border transactions. As the report points out, “policy volatility tends to prolong transaction time, reduce transaction premiums and moderate overall activity.” However, the environment remains conducive to smaller and more strategic procurement, particularly in the recovery sectors.
Fiscal policy should play a key role in the evolution of economic resilience. Governments are expected to increase their spending on health, pensions and defence, while funds allocated at the time of VOCID will disappear. Tax reductions in the United States are likely to expand, although uncertainties remain as to the treatment of multinational companies. This fiscal stimulus, together with the delayed effects of monetary policy, could help promote a more balanced recovery.
The path to stability, however, is not without obstacles. The persistence of inflation, geopolitical risks and changes in trade policy require prudent management. Regina The Mayor highlighted the importance of long-term collaboration and planning.
“Through collaboration and determination, current barriers can be overcome by 2026, paving the way for a more stable global economic environment. »
In the future, the world economy is facing a critical turning point. With inflation expected to cool down and stabilize growth, there is potential for a more predictable and prosperous future. However, success will depend on the ability of governments and institutions to address these challenges with agility and foresight. As indicated in the report, proactive policies and international cooperation will be essential to mitigate risks and promote sustainable economic growth.
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