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China's growth helps bolster global economic recovery in H1(Xinhua) 15:28, August 24, 2024
BEIJING, Aug. 23 (Xinhua) -- The global economy in the first half of this year has experienced modest growth and a sluggish recovery, with prospects remaining uncertain. Yet, China's growth, buoyed by a rebound in domestic consumption and strong export performance, has provided a much-needed boost to global economic momentum.
The International Monetary Fund (IMF)'s July edition of the World Economic Outlook (WEO) forecasts global growth to remain stable at 3.2 percent in 2024 and 3.3 percent in 2025, yet warns that near-term risks have gained prominence, particularly upside risks to inflation, as services inflation remains high and geopolitical tensions continue.
In an increasingly turbulent and imbalanced global environment, China's economy has continued its upward trajectory, registering a 5-percent growth in the first half of 2024. By fostering new quality productive forces and promoting high-quality development, China remains the main engine for the global economy.
IMBALANCES
"The Global Economy in a Sticky Spot" reads the subtitle of the July edition of the WEO.
Despite a slow overall recovery in the first half of 2024, global economic imbalances continue to deepen. The divergence in growth among advanced economies is particularly stark. While the U.S. economy accelerates, Europe struggles to keep up.
U.S. gross domestic product (GDP) expanded at an annualized rate of 2.8 percent in the second quarter, up from 1.4 percent in the first. In contrast, the eurozone's economy remains lethargic, with contractions recorded in several economies, including Germany, Latvia, Sweden and Hungary, in the same period.
Analysts argue that recent U.S. policies, notably the Inflation Reduction Act, have exacerbated these disparities. By boosting debt and subsidies, the United States has stimulated both consumption and production. However, American industrial policies have also enticed European manufacturers to relocate stateside, further eroding Europe's industrial base and amplifying fears of deindustrialization in Europe.
Monetary policy, too, has grown more intricate. Japan, which ceded its position as the world's third-largest economy to Germany last year, surprised markets with 0.8 percent GDP growth in the second quarter, exceeding expectations. Nevertheless, the Japanese government projects a full-year growth of just 0.9 percent, with significant risks stemming from the widening monetary policy gap between Japan and the United States.
The Bank of Japan ended its negative interest rate policy in March and raised its key short-term interest rate in July, as speculations grew that the U.S. Federal Reserve might cut rates by September. On Aug. 5, Japan's Nikkei 225 plunged 12.4 percent on Monday, marking its worst day since the Black Monday crash of 1987.
Meanwhile, emerging markets and developing economies are enjoying a rosier outlook, even as short-term volatility persists. The World Bank's June Global Economic Prospects report predicts that, as the effects of monetary tightening in major economies recede, growth in Latin America, the Middle East, and Sub-Saharan Africa will pick up pace. The report forecasts growth rates of 2.7 percent, 4.2 percent and 3.9 percent in these regions respectively next year, outstripping those of advanced economies.
MULTIPLE CHALLENGES WEIGH ON GROWTH
According to the latest reports from the IMF and the World Bank, global economic growth is projected to inch forward to 3.2 percent and 2.6 percent respectively this year, with both forecasts suggesting a marginal 0.1 percentage point uptick for 2025.
Economists anticipate this year could mark the first stable expansion in three years. But by historical standards, the pace remains sluggish, with numerous headwinds threatening to derail the current trajectory in the latter half of this year.
One looming threat is the mounting global debt. The Institute of International Finance reported a staggering 1.3 trillion U.S.-dollar surge in global debt in the first quarter of 2024, pushing the total to a record 315 trillion dollars. The global debt-to-GDP ratio now hovers at 333 percent, with advanced markets like the United States and Japan responsible for the bulk of the increase.
In the United States, federal debt surpassed 35 trillion dollars for the first time, and interest payments are projected to outstrip defense spending this year. Such ballooning debt poses significant risks to global economic and financial stability, said Sant Manukyan, an analyst at Is Yatirim, the investment banking division of Isbank Group in Istanbul.
Another destabilizing factor is that 2024 is the biggest election year in human history. Half of the world's population will go to the polls in over 70 countries.
In the United States, the economic and industrial policy divides between Democratic and Republican presidential candidates could have far-reaching effects.
For instance, Goldman Sachs economists predict that a re-election of Donald Trump, with his proposed tariff hikes, could shave 1 percent off the eurozone's GDP.
