QNB said today in its weekly economic commentary that the outlook for the global economy for this year has improved on the back of positive developments in all the three major economies (the US, the Euro Area, and China). It maintained that, while the expected pace of expansion of 2.9 percent is below the long-term average, it stands at a safe distance from the recessionary range.
The report cited strong headwinds at the beginning of the year that set a pessimistic tone in outlining global growth expectations for 2024. It cited a Bloomberg survey, which tracks forecasts from analysts, think tanks, and research houses, that showed that the expected pace of expansion in world GDP for this year was 2.6 percent. That figure was one percentage point below the 3.6 percent average during 2000-2023. Furthermore, it is just marginally above the threshold of 2.5 percent below which a yearly growth rate indicates a global recession. During the period of 2000-2023, global recessions only occurred during the exceptional episodes of the Global Financial Crisis, in 2009, and during the COVID-19 pandemic, in 2020. Since 1980, the global economy has experienced four recessions according to this standard.
"However, positive developments led to a revision of expectations in the three major world economies: the US, China, and the Euro Area, which jointly represent approximately 60 percent of global GDP," the report added before examining three drivers of that improved outlook. ,
The first was the upward trajectory of the US economy's growth projections. Data prints signaled that the economy was standing on firm footing. The GDP figures for the Q1-2024 showed that consumption of services, which accounts for a sizable share of the economy, grew at an annualized rate of 4 percent, significantly above the 2.3 percent pace of expansion in 2023, the report said. There were also the healthy household balance sheets and robust labor markets that continued to provide support to consumption. The report also highlighted leading indicators showing that the anticipated deceleration of the US economy will be smooth, with the current consensus pointing to growth of 2.4 percent for this year, just barely below the 2.5 percent growth of 2023. The improvement in perspectives for the worlds biggest economy provided a significant contribution to the improvement of the global outlook.
The second driver meanwhile was the improvement in Chinas, with Q1-2024 growth coming in at 5.3 percent, beating expectations quite comfortable. QNB cited the wide range of policies implemented by the Chinese government to provide support to the private sector and further promote foreign direct investments. These initiatives, the bank said, ranged from interest rate reductions and liquidity injections to public investment.
The third was that the Euro area was undergoing a mild recovery as well. After getting dragged in a negative spiral that saw growth of -0.1 percent in Q2 and Q3 of 2023, this year's growth came in at 0.55 percent.
