KPMG International predicts a slowdown in global growth from 2.7% in 2023 to 2.5% in 2024, with a recovery to 2.7% anticipated in 2025. Inflation is expected to cool, but price pressures could take longer to subsid in some areas.
The latest predictions in KPMG’s Q2 2024 Global Economic Outlook reflect the following:
2023 | 2024 | 2025 | |
GDP | 2.7% | 2.5% | 2.7% |
Inflation | 6.4% | 5.0% | 3.5% |
Unemployment | 5.4% | 5.4% | 5.4% |
Key Factors Influencing the Outlook
Geopolitical Uncertainty:
Nearly half of the global population will vote or has voted in 2024.
Armed conflicts and trade tensions may lead to more isolationist policies.
These factors could result in more frequent inflation bouts and activist monetary policies.
US Federal Reserve Rate Cuts:
A slower expected path for rate cuts will significantly impact developing economies, making them more sensitive to exchange rate movements.
Weakening currencies relative to the US dollar will be inflationary for these economies.
Supply Chain Restructuring:
Friend-shoring, re-shoring, and near-shoring are causing supply chain reshuffles at higher costs.
Middle East conflicts and increased shipping costs due to high demand and weather are further complicating trade.
Natural Disasters:
The National Atmospheric and Oceanic Administration predicts a record number of major storms in 2024, likely adding to shipping delays and travel disruptions.
Long-Term Outlook
Despite current uncertainties, KPMG’s economists maintain a cautiously optimistic long-term outlook. Yael Selfin, Chief Economist at KPMG UK, stated:
“Prospects for 2025 are better, with inflation expected to return towards target and central banks more confident to cut policy rates from the current restrictive levels. The silver lining is a tailwind for big-ticket consumer purchases and business investment. Merger and acquisitions activity could also gather steam, as financial conditions ease and dry powder is deployed. However, the uncertainty remains around the policy shifts, which will likely fuel more insular and protectionist policies."
Challenges and Opportunities
The productivity boost from generative artificial intelligence (Gen AI) may not materialise globally for several years due to high energy costs, potentially widening the gap between developed and developing economies.
Labour Market: AI advances could disrupt labour markets during the transition, but a stable global unemployment rate is forecasted.
Regina Mayor, Global Head of Clients & Markets at KPMG International, said: “For politicians and central banks, the challenge going forward is contending with the rise in political uncertainty, deglobalisation and a changing workforce demographic, at a time when international collaboration and – simply – the availability of people to increase productivity, is at a premium.
“While challenges remain, the outlook – in my view – is cautiously optimistic. The inflationary pressures are easing in many parts of the world and the political will is gradually shifting
toward consensus on the need to drive growth. There will be bumps in the road ahead, but we’re slowly seeing light at the end of the tunnel.”
South Africa
Elections: The ANC failed to secure a parliamentary majority for the first time since apartheid ended.
Market Impact: The rand depreciated post-election due to uncertainty about the new government coalition's economic policies.
Frank Blackmore, Lead Economist, at KPMG Southern Africa, said: “South Africa had its general elections in the final week of May 2024 and results have shown that the largest party, the ANC, has failed to gain a parliamentary majority for the first time since the end of apartheid. Government mismanagement and malversation especially over the last 15 years have led to a lower-than-expected voter turnout pushing for change.
"Substantial uncertainty, as was witnessed from the depreciation in the rand over the days following the midweek election, surrounded the government that was to be formed depending on whether that coalition is struck with more populist fundamental parties or more market friendly centrist parties.”
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