While we anticipate a slight GDP growth acceleration across advanced economies from 1.5% in 2023 to 1.6% in 2024 and 1.8% in 2025, we expected a simultaneous slight deceleration among emerging markets from 4.2% in 2023 to 4.1% in 2024 and 2025.
The key growth drivers in advanced economies will be gradually looser monetary policy and rebounding inflation-adjusted income growth, especially in Europe and the UK. Across emerging markets, we anticipate the structural slowdown in mainland China to offset robust momentum in India and a slight growth acceleration across the Latin America (LatAm) and Middle East and North Africa (MENA) regions into 2025.
We expect global inflation will cool from an average pace of 6.2% in 2023 to 4.6% in 2024 and 3.5% in 2025. Inflation is expected to decline faster in advanced economies and approach central bank targets in 2025 as persistent services inflation gradually dissipates while core inflation stickiness remains a key feature of the outlook across emerging markets. Easing supply constraints, reduced labor shortages, lower energy prices and moderating demand growth are expected to keep inflation in check, even if risks are tilted to the upside.
Central banks are expected to ease monetary policy gradually as disinflation continues apace. Still, with risks to the inflation outlook tilted to the upside, policymakers are likely to take the “escalator on the way down,” easing policy in a measured way.
Following several high-stakes elections, we had initially anticipated a tightening of fiscal policy in many economies aimed at managing high government debt with lower government spending and potentially higher taxes. The reality may be different, with less fiscal tightening in the wake of the French and UK elections and in Mexico, where President-elect Claudia Sheinbaum could take advantage of her large electoral win to favor more fiscal largesse. In the US, averting a fiscal cliff at the end of 2025 could mean greater fiscal spending.
