Review of the World Economy in 2024 and Its Outlook:Navigating a Winding Path Along the Medium-Low Growth Trajectory

The world economy in 2024 proved surprisingly resilient despite multiple shocks. This resilience can largely be attributed to the effects of tight monetary policies and the strong performance of labor markets in major economies. Although a recession was narrowly avoided， the intensifying strategic rivalries among major powers， rising geopolitical risks， the resurgence of trade protectionism and sluggish global growth have all cast a shadow over the economic outlook.

Review of the World Economy in 2024

Overall， global economic growth in 2024 remained steady but slow， characterized by stable employment， declining inflation， and a modest recovery in trade and investment. Fiscal policies remained relatively loose across many countries， while major central banks began cutting interest rates， contributing to a significant rise in asset prices.

I. The Economy Navigated a Winding Path Along the Medium-Low Growth Trajectory

In 2024， the world economy recovered slowly amidst multiple challenges. Despite uncertainties brought by geopolitical tensions， fragmented trade and tight money policies of major economies， global economic growth remained stable. Major international institutions maintained a cautious and neutral outlook on the economic situation. In October 2024， the International Monetary Fund （IMF） projected that the world economy would grow by 3.2% in 2024， a 0.1 percentage point decrease from 2023， consistent with its July forecast. At state level， developed economies were expected to grow by 1.8% in 2024， 0.1 percentage point higher than in 2023. Among them， the U.S. and Japan were projected to grow by 2.8% and 0.3% respectively， down 0.1 and 1.4 percentage points from 2023. The Eurozone and the UK were expected to grow by 0.8% and 1.1% respectively， up 0.4 and 0.8 percentage points from 2023. Emerging markets and developing economies were projected to grow by 4.2%， a 0.2 percentage point decline from 2023. Among them， China and India were expected to grow by 4.8% and 7.0% respectively， down 0.5 and 1.2 percentage points from 2023. Russia’s growth rate was projected at 3.6%， unchanged from the previous year， while Brazil and South Africa were expected to grow by 3.0% and 1.1% respectively， up 0.1 and 0.4 percentage points from 2023.

II. Employment Remained Stable

The global employment situation in 2024 improved compared to 2023. However， the employment rates varied significantly across countries， and youth employment remained a pressing issue. In May 2024， the International Labour Organization （ILO） projected that the global unemployment rate would decline to 4.9% in 2024， down from 5.0% in 2023. Despite this， job opportunities remained scarce， with the global “jobs gap” （the number of people willing but unable to work） still standing at 402 million. Generally speaking， developed countries had low unemployment rates and tight labor markets， while most developing countries continued to face high unemployment rates. But when it comes to trends， unemployment rates in developed countries mostly showed an upward trajectory， whereas those in emerging markets and developing economies were largely on a downward trend. Additionally， youth unemployment remained high globally， a situation that is unlikely to improve in the near term. In August 2024， the ILO projected that the global youth （aged 15 to 24） unemployment rate would reach 12.8% in 2024， approximately 3.5 times that of adults aged 25 and over. Specifically， youth unemployment rates in lower-middle-income and upper-middle-income countries were 12.9% and 15.3% respectively.

III. Inflation Rates Further Declined

Global inflation rates continued to decline in 2024. The IMF expected global inflation in 2024 to average 5.9%， a 0.8 percentage point decrease from 2023. In developed economies， the inflation rate was 2.7%， down 1.9 percentage points from 2023. Data from the U.S. Department of Labor showed that in September 2024， the U.S. Consumer Price Index （CPI） increased by 2.4% year-on-year and 0.2% month-on-month. The core CPI （excluding food and energy） rose by 3.3% year-on-year， indicating a slowdown in overall inflation. According to Eurostat， inflation in the Eurozone cooled in September 2024， with the Harmonized Index of Consumer Prices （HICP） increasing by 1.7% year-on-year， dipping below the 2% target set by the European Central Bank for the first time since 2021. In contrast to the downward trends in the U.S. and Europe， Japan’s inflation rate showed a rebound. Data from Japan’s Ministry of Internal Affairs and Communications revealed that the core CPI （excluding fresh food） rose by 2.4% year-on-year in September 2024， marking the 37th consecutive month of increase. Similarly， inflation rates in emerging markets and developing economies continued to decline， reaching 7.9% in 2024， a 0.2 percentage point decrease from 2023. According to data from the national statistical bureaus of relevant countries， in September 2024， China， Brazil， India， Russia， and South Africa witnessed a year-on-year increase in the CPI of 0.4%， 4.4%， 5.49%， 8.6%， and 3.8% respectively.

IV. Leverage Ratio Declined but Disparities Among Countries Remained

Global debt continues to rise， but the overall leverage ratio （total debt to GDP ratio） has started to decline. At the same time， significant disparities among countries indicate that global debt risks are unevenly distributed. According to a report by the Institute of International Finance （IIF）， global debt reached $312 trillion in the second quarter of 2024， a modest increase of $2.1 trillion since the start of the year， far smaller than the $8.4 trillion rise seen in the same period the previous year. Although total debt is still rising， the global leverage ratio has started to decrease. In Q2 2024， the global leverage ratio stood at 328.4%， a decrease of 0.8 percentage points from the same period in 2023， signaling a downward trend in global debt risk. By sector， the decline in the global leverage ratio was mainly driven by the household and non-financial corporate sectors. In Q2 2024， these sectors’ leverage ratios were 90.6% and 40.9% respectively， down by 1.1 and 0.9 percentage points compared to the previous year. Looking at countries， the trends in leverage ratios were markedly different. In Q2 2024， the leverage ratio of major developed economies was 376.8%， a decrease of 3.9 percentage points from 2023， driven by factors such as high inflation and tight monetary policies. In contrast， major emerging markets saw an increase in their leverage ratios， reaching 245.2%， up by 4.4 percentage points from the previous year. This rise was largely due to higher external financing costs caused by tightening monetary policies in developed economies， as well as large-scale fiscal stimulus measures implemented by some countries.

V. A Strong Year for Global Equity Markets

Global equity markets saw broad increases in the first ten months of 2024， with developed economies continuing the strong performance of 2023. In the U.S.， the Samp;P 500 rose sharply by 19.6%. In Europe， major indices in most countries posted gains， with the exception of France’s CAC40， which edged down by 0.3%. Germany’s DAX and the UK’s FTSE 100 rose by 10.6% and 4.9% respectively. In Asia， Japan’s Nikkei 225 surged by 16.8%. In comparison， stock markets in emerging and developing economies were more divergent but still generally positive. The Shanghai Composite Index and Hong Kong’s Hang Seng Index rebounded by 10.2% and 19.2% respectively， reversing the downward trend of 2023. Stock markets in India， the Philippines， Malaysia， Israel， and Indonesia also saw positive growth. However， some markets， such as Russia’s RTS and Mexico’s MXX indices， dropped by 23.3% and 11.7% respectively.

VI. Interest Rates Were Declining

In 2024， with the exception of a few economies such as Japan， most major developed economies began cutting interest rates. In fact， Latin American countries such as Brazil， Chile， Argentina， and Peru had already initiated rate-cutting in 2023. In the first half of 2024， economies in Europe and North America， including Switzerland， Sweden， Canada， and the Eurozone， also started lowering rates， signaling a shift in monetary policy among developed countries. In September 2024， the U.S. Federal Reserve made a substantial 50 basis point rate cut， a significant move indicating the monetary policy shift of global central banks. In contrast， the Bank of Japan raised interest rates twice， in March and July 2024， to 0.25%. Meanwhile， long-term interest rates in major economies remained relatively high. In 2023， the average yields on 10-year government bonds in the U.S.， Eurozone， UK， Japan， and China were 4.0%， 3.3%， 4.1%， 0.6%， and 2.7% respectively. As of October 2024， these yields were 4.3%， 3.1%， 4.4%， 1.0%， and 2.2% respectively.

VII. USD Exchange Rate Remained Volatile

The value of the USD exhibited significant volatility from 2023 to 2024 due to changes in the global economic landscape， geopolitical tensions and the Fed’s monetary policies. Early in 2023， the USD Index fell to around 103， and then fluctuated between 100 and 107. In the first ten months of 2024， the USD/JPY exchange rate first rose， then fell， and subsequently increased again， reaching a peak of 161.73 on July 10， marking a cumulative rise of 7.8%. The USD/euro exchange rate fluctuated， with a modest 1.4% increase. The USD/RMB exchange rate also saw fluctuations， rising， then falling， before rising again， ultimately gaining 0.3% in 2024. According to the Bank for International Settlements， as of October 2024， the real effective exchange rate indices for the USD and euro were 110.03 and 101.48 respectively， reflecting declines of 0.39% and 0.07% from the previous year. The JPY and GBP real effective exchange rate indices stood at 71.44 and 111.03， reflecting changes of -1.5% and 3.9% respectively.

VIII. International Trade Has Recovered Gradually

Despite the increased uncertainty in trade policies due to regional conflicts， global trade has gradually recovered. According to the World Trade Organization （WTO）， international goods trade volumes declined by 1.1% in 2023， with goods trade value falling by 4.9% to $25.3 trillion. In contrast， services trade grew by 8.9% to $6.9 trillion. The WTO projected that in 2024， global goods trade volume would grow by 2.7%. The Global Supply Chain Pressure Index published by the Federal Reserve Bank of New York in October 2024 showed a slight decrease in September to 0.13 from 0.20 in August， but still a significant 120.2% year-on-year increase. Notably， the index turned positive for three consecutive months from July to September 2024， though the increase was small， suggesting a slight rebound in supply chain pressures.

IX. Cross-Border Investment Continued to Decline but the Trend Is Expected to Reverse

Global foreign direct investment （FDI） continued to decline in 2023. A report by UNCTAD indicated that due to weak growth prospects， economic fragmentation， geopolitical tensions， and supply chain diversification， global FDI fell by 2% to $1.33 trillion in 2023. Excluding the impact of a few European conduit economies， global FDI dropped by more than 10%. Despite the challenging investment environment， the decline in cross-border investment in 2024 has shown signs of easing. On the one hand， multinational companies’ profits remained high， providing a solid foundation for cross-border greenfield investments. On the other hand， after two years of high interest rates， central banks in many developed economies began cutting rates. Improved financing environment makes it easier for international projects to raise money and is conducive to cross-border mergers and acquisitions. Although global FDI has been affected by slow growth prospects， trade and geopolitical tensions， industrial policies， and supply chain diversification， moderate growth in investment is still expected for the year ahead.

X. Commodity Prices Declined

Commodity prices broadly declined in 2024. According to the IMF， the global commodity price index was expected to be 165.2 in 2024， a 0.3% decrease from 2023. However， the price changes across different categories varied significantly. In terms of energy prices， the fuel price index was expected to drop by 3.8% to 182.2， mainly driven by falling natural gas and coal prices. In contrast， the price of Brent crude oil was projected to rise by 4.2% to $84 per barrel due to geopolitical tensions and OPEC+ production cuts. In food， the food and beverage price index was expected to fall slightly by 0.3% to 135.9， with food prices decreasing somewhat and beverage prices increasing due to weather-related factors. In addition， the industrial input price index， including primary agricultural products and metals， was expected to rise by 0.5% to 164.5， driven primarily by the rise in agricultural product prices. Metal prices， on the other hand， saw a slight decline due to adequate supply and weak demand.

Issues Worth Noticing Regarding the World Economy at Present and in the Future

There are many factors that may influence or even pose challenges to the world economy. The following six issues deserve particular attention in the near and distant future.

I. The Federal Reserve Kicks Off a Rate-Cutting Cycle

In September 2024， the Federal Reserve announced a 50 basis point cut in the federal funds rate to a range of 4.75%-5%， initiating a new rate-cutting cycle. Since 2022， in response to high inflation pressures， the Fed has significantly raised the federal funds rate from 0%-0.25% to 5%-5.25%. Despite two years of interest rate hikes， the U.S. economy has remained resilient for three main reasons. First， sustained fiscal stimulus. In spite of the Fed's monetary tightening policies， the U.S. government has provided substantial fiscal support through large-scale expenditures （such as infrastructure investment， support for technological innovation， and clean energy projects）， creating numerous job opportunities and maintaining long-term growth momentum. Additionally， fiscal stimulus policies implemented during the pandemic （such as income subsidies） have enabled U.S. residents to accumulate savings， ensuring that consumption remains resilient even after these policies have ended.

Second， a robust real estate market. Driven by infrastructure spending， income growth， and relaxed immigration policies， the U.S. housing market has experienced strong demand and tight inventory. Since March 2021， the homeowner vacancy rate has remained below 1% for 13 consecutive quarters.

Third， rapid technological innovation. The widespread adoption of technologies like artificial intelligence （AI） has boosted the U.S. economy’s potential growth rate， with the tech sector -- particularly major companies like Apple， Microsoft， Amazon， and Google -- maintaining a dominant global position.

In 2024， U.S. inflation pressures gradually eased， with a slight rise in unemployment and fluctuating non-farm payroll numbers in Q3. The Fed’s rate cuts aim to achieve a “soft landing” and avoid a recession. However， the pace of future rate cuts remains highly uncertain， largely dependent on key economic indicators like inflation and employment. After President Trump's inauguration in 2025， his policies may have a significant impact on U.S. employment and inflation， thereby influencing the Fed’s decisions.

II. The Global Industrial Chain Accelerates Its Reconfiguration

From 2020 to 2023， global trade saw significant trends of nearshoring， friendshoring， and reshoring， accelerating the reconfiguration of global supply chains. In the U.S.， reshoring became noticeable in 2011. And since 2020， nearshoring and friendshoring have gained momentum with Southeast Asia being a major destination since this region is an important pivot of the U.S. Indo-Pacific Strategy. In Europe， reshoring is less pronounced， but policies promoting relocation have intensified. Nearshoring has been particularly evident in this region， with significant FDI growth in Hungary， Poland， Egypt， Morocco， and Romania， concentrated in industries like electronics， chemicals， automotive， metals， and semiconductors. Japan and South Korea show no clear trends in industrial chain relocation. By sector， reshoring is most common in high-tech industries， while nearshoring and friendshoring dominate low-tech industries. Overall， the U.S.-led trends of reshoring， nearshoring， and friendshoring are prominent in the short term. However， challenges still exit such as rising domestic labor costs， weak industrial bases in neighboring countries， and divergent interests among allies. If these trends persist excessively， they could lead to regionalization， fragmentation， and politicization of global supply chains， undermining optimal resource allocation and long-term global growth. Therefore， balancing supply chain security with globalization remains crucial.

III. The Global Labor Market Faces Structural Problems

The global labor market faces three structural problems. First， the global jobs gap （people willing but unable to work） and unemployment remain high. In 2024， the global jobs gap stood at 402 million， concentrated in developing countries， and 183 million people were counted as unemployed. Second， youth unemployment is persistently high， with a dim prospect for improvement in a short period of time. The unemployment rate for young people aged 15 to 24 is 3.5 times that of adults aged 25 and above. Additionally， 20.4% of global youth are “NEETs” （not in employment， education， or training）， with over 270 million struggling to find decent jobs. Third， the widespread adoption of AI， while boosting productivity， will displace some jobs， exacerbating labor market inequality. AI creates a “digital divide，” as workers lacking basic digital skills face increasing pressure， widening productivity and income gaps. The rapid development and application of AI will significantly transform the global labor market.

IV. AI Is Leading a New Round of Scientific and Technological Revolution and Industrial Transformation

The rapid development of AI technologies， represented by ChatGPT， has become a major topic in 2024， exerting profound socio-economic impacts. For one thing， AI promotes the emergence of new industries， business models and professions， serving as a key engine for investment in emerging sectors. AI has given rise to industries such as big data， cloud computing， and platform economies， as well as new professions like machine learning experts and algorithm engineers. It has also spurred investment in areas such as chips， infrastructure， and large language models. Goldman Sachs estimates that global AI investment could reach $200 billion annually by 2025. For another， AI is likely to significantly enhance productivity and boost economic growth. First， AI improves the productivity of less-skilled employees within an occupation or organization， such as"call center customer support agents，"software developers and"mid-level professionals. Second， AI contributes to scientific advancement. For example， AI has helped scientists understand"how proteins fold and has been used to"control the plasma in the fusion reactor. Third， AI boosts high-skilled workers’ productivity. In the area of"health care， AI can suggest diagnoses and treatment protocols by analyzing medical images， lab reports and checkup data. It is worth noting that AI technology is still in its early stages and its impact on productivity remains limited. History tells us that the widespread adoption of general-purpose technologies takes time and productivity enhancement during this process is often gradual.

V. The Marginal Effect of the WTO Is Declining

From 2023 to 2024， the WTO made some progress in advancing global trade governance but also faced numerous challenges. On one hand， the WTO achieved breakthroughs in negotiations on investment facilitation， e-commerce， digital trade， fisheries subsidies， agricultural subsidies and climate change. The 13th WTO Ministerial Conference in 2024 touched upon a wide range of topics， including fisheries subsidies， reform of the dispute settlement mechanism， e-transmission tariffs， agriculture and food security， intellectual property rights for COVID-19 vaccines， e-commerce， and industrial and agricultural subsidies. This reflects the international community’s strong aspiration for enhanced multilateral coordination and improved global trade rules. On the other hand， the WTO reform has lagged behind the need for adjustments to trade rules and institutional innovations. Key issues such as the dispute settlement mechanism and agricultural subsidies have remained deadlocked. Despite ongoing negotiations， including those on the suspension of the Appellate Body， no consensus was reached by the end of 2024. Agricultural negotiations， which involve market access， domestic support and export competition， remain a persistent challenge in WTO reform. Diverging interests between developed and developing countries have significantly slowed progress. All these have severely undermined people’s confidence in the WTO. And the rise of regional trade agreements further threaten the dominant position of the WTO. In recent years， high-standard regional trade agreements such as the Regional Comprehensive Economic Partnership （RCEP） and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership （CPTPP） have emerged as new platforms for reshaping regional and global trade rules. Meanwhile， major economies have accelerated their shift towards nearshoring， while emerging markets and developing economies have also speeded up the building of new South-South cooperation mechanisms. These trends have contributed to the fragmentation of the multilateral trade system， further weakening the WTO’s role in global trade governance.

VI. The US and Its Western Allies Hype Up China’s “Overcapacity”

Some Western economies， particularly the US and Europe， have been maliciously trumping up the narrative of China’s “overcapacity”. However， their definition of “overcapacity” is based on four major misconceptions. First， underutilization of production capacity does not equate to overcapacity. Second， export expansion is not a sign of overcapacity. Third， declining profit margins and business exits do not indicate overcapacity. Fourth， potential production capacity exceeding the most optimistic demand forecasts does not mean overcapacity. Both economic theories and practices demonstrate that underutilization of capacity， large-scale export trade， declining profits， business exits， and potential capacity exceeding demand are not valid indicators of overcapacity. China’s green industry is competitive because it enjoys technological advantages and has been guided by effective policies， which align with the principle of competitive neutrality. The industry has established its leading position through fair competition， leveraging both technological and cost advantages. The unfounded accusations of “overcapacity” used by Western countries against China’s green sector are pure protectionism and for political purposes， and they are far from the truth. In response， China should steadfastly promote a universally beneficial and inclusive economic globalization and global production capacity cooperation so that high-quality products could be beneficial globally. Meanwhile， it should further deepen domestic reforms， accelerate the establishment of a unified national market and better coordinate the role of the government and the market.

Global Economic Outlook for 2025

In 2024， despite moderate global economic recovery， easing inflationary pressures， rate-cutting cycles initiated by major central banks， gradual trade recovery and a reversing trend in international investment， the global economic outlook still faces significant downward risks and uncertainties. First， the Trump administration's potential imposition of 10% global tariffs and 60% tariffs targeting China could derail global trade recovery and trigger a trade war. Second， escalating geopolitical tensions may cause supply shocks and commodity price volatility， particularly affecting energy markets by soaring prices of oil and natural gas. In addition， geopolitical conflicts may also disrupt global shipping system， making global supply chain more vulnerable. Third， policy missteps by major central banks may pose dual risks. On the one hand， premature easing could reignite inflation. On the other hand， delayed rate cuts might trigger recession. Fourth， accelerating trade fragmentation threatens global supply chains and reduces production efficiency. Strategic rivalries and geopolitical conflicts among major powers could strain regional trade and investment relations， leading to new trade barriers and protectionist measures， and severely undermining the global multilateral trade system.

Looking ahead to 2025， growth prospects remain highly contingent on two critical variables： the evolution of trade policies under the new Trump administration and the economic performances of China and the U.S. Based on the current international economic and political situation， the global economy is expected to maintain medium-low growth at around 3.0% in 2025， with emerging markets continuing to outperform developed economies. However， the possibility of a sharp decline in global growth caused by intensified geopolitical turmoil or escalating trade frictions still exists.

Xiao Lisheng is Senior Research Fellow amp; Director of the Department of Global Macroeconomy， Institute of World Economics and Politics， CASS and Yang Zirong is Deputy Research Fellow of Institute of World Economics and Politics， CASS