Qatar National Bank (QNB) confirmed that the global economy has proven to outperform the pessimistic expectations issued by analysts, for the second year in a row, in a scenario repeating what happened in 2023, to record moderate growth of about 3.1 percent by the end of 2024, supported by the gradual normalization of rates. Inflation, the monetary easing cycle, and the stability of the Chinese economy.
The bank indicated in its weekly report that expectations at the beginning of the year were pessimistic, as weak performance in major advanced economies dominated the scene, which led to reducing global expectations to 2.7 percent, which is considered close to the threshold of economic recession, as the United States witnessed a slowdown. China was growing rapidly, while China was experiencing disappointing growth, while Europe continued to stagnate.
The report indicated that the return of inflation fears in the first half of 2024 raised a great deal of uncertainty about the path and direction of interest rates, but despite these negative expectations, labor markets witnessed a gradual relief and maintained their flexibility, while there was a moderation in inflation rates. This led to a change in sentiment and a shift in expectations later in the year.
This improvement also caused many central banks to take decisions to ease monetary policies, such as the US Federal Reserve reducing interest rates by 100 basis points to 4.5 percent, as well as the European Central Bank reducing interest rates to 3 percent.
The report considered that, as a result, conditions were positive at the end of the year, as they were characterized by moderate global growth of 3 percent, with low inflation in most advanced economies and significant easing of monetary policies.
The report addressed three main drivers of economic performance in 2024 that led to such upward revisions in global growth expectations, the first of which is that growth in the United States has once again proven to be much stronger than previously expected.
He pointed out that with estimates that this year will end with growth of 2.7 percent, the US economy has maintained a strong level of growth, exceeding its long-term trend of 2.3 percent.
The report pointed out that strong consumption, in particular, which represents about 70 percent of the country’s gross domestic product, played a role in enhancing the performance of the American economy.
The second driver of the economy addressed in the report relates to China. After a difficult period of recession, weakness in the real estate sector, and low consumer confidence, the Chinese government launched a large package of stimulus policies, which contributed to improving investor sentiment and supporting the stability of economic growth in the country.
As for the third driver, it was in the euro area, where economic expectations were more optimistic than expected early in the year. The energy crisis subsided and relatively easy financial policies appeared in many countries, which contributed to supporting consumption and preventing a severe economic recession. .