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Considering the pace at which the world is progressing in maintaining a healthy economy many risks still lurk in the corner. Many of the major economies have started cutting down their bank rates since they feel they have curtailed the rising inflation and many other problems to be tackled.
World Economic Growth at Risk
The recent ‘World Bank report‘ (June 2024) suggests that the global economy growth is projected at 2.4 percent. This is followed by a strong growth of 2.7 percent for 2025. It may be at the risk of avoiding a recession in the coming months, which we still have to wait and watch.
With many economies waiting for the U.S. Federal Reserve to make a move in terms of rate cuts the economy looking for a smooth transition is likely unlikely. With the rise in borrowing costs in the economy, it looks like a new trend for another battle for taming inflation. The performance of the important economic indicators suggests the growth of the U.S. economy is below the potential of the economy. With mixed signals from the economy, the announcement of more cuts of interest rates hangs in the balance- with the signaling of a maximum of one or two cuts. Keeping in mind the election year, which could go either way in Favor of the Democrats or the Republicans.
China’s slowing growth trends
The Chinese economy is going through a phase of slow growth. With many of their sectors performing at sub-par levels- for example, the housing sector seems to add a lot of pressure to the economy. Their economic growth is at its lowest since the last in the early 90s. It would likely hurt many of the developed and developing economies that are in trade since many of the economies are significantly dependent on Chinese products. If their economy continues to slow down, it will impact the world's economic growth in 2024. If we continue to see the growth trend, chances of a recovery could be a task for the economy.
The stock market treads on a slippery slope
Major stock market indices of Europe and the United States have started to show losses considering the political disturbances and also the position taken by the Federal Reserve in terms of the rate cuts. For investors in the United States, the chances for inflation cooling and the economy weakening at the same time seems to be a discouraging sign. European stocks are showing a weakening in terms of value due to the French elections.
The rise in the AI revolution posts the pandemic, continues to perform well. It remains to see how much all the allied sectors such as the chip manufacturing companies, cloud computing companies and so on stand to gain till the end of the year.
Some of the highlighted risks stand true till the end of the year and do shape the way how the world economy will perform in 2025.
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