Reassuringly for investors, the latest batch of projections from economic soothsayers continues to predict a period of steady, if unspectacular, global growth. The forecasts also highlight a number of economic concerns including “sticky” inflation, large budget deficits and geopolitical uncertainties, which could inevitably create some investment challenges.
Reassuringly for investors, the latest batch of projections from economic soothsayers continues to predict a period of steady, if unspectacular, global growth. The forecasts also highlight a number of economic concerns including “sticky” inflation, large budget deficits and geopolitical uncertainties, which could inevitably create some investment challenges.
Growth rates beat expectations
Economic growth figures released over the summer generally proved stronger than analysts had expected, particularly in relation to Europe and the US (in Q2). And while economic momentum is expected to soften across the second half of this year, forecasters are still predicting steady rates of growth. The latest figures from the International Monetary Fund (IMF), for instance, forecast global growth of 3.2% for the whole of 2024 with the rate rising slightly to 3.3% next year.
Inflation persistency
The IMF’s musings were contained in a report entitles ‘The Global Economy in a Sticky Spot’, which highlight two prominent near-term risks currently undermining growth prospects. Firstly, the IMF warned that ‘services inflation is holding up progress on disinflation’ which could results in interest rates remaining ‘higher for even longer’. Secondly, a deterioration in public finances has left many countries in a position of fiscal vulnerability and this is ‘magnifying economic policy uncertainty’
Geopolitical uncertainties
In what was dubbed ‘the year of the election’ geopolitical uncertainties unsurprisingly continue to be a key concern as well. Indeed, their impact on global growth prospects can only be expected to rise in the near-term as the US presidential election looms ever closer. Continuing geopolitical conflicts and the rise in geoeconomic competition is also creating challenges for the global economy.
Elements at play
Economic resilience has flowed through to central bank monetary policy as global institutions have largely adopted a cautious approach. Slower but still positive growth, lower inflation and interest rate reductions are a positive combination for investors.
Whatever uncertainties do like ahead, one investment fundamental remains constant: long-term investors are best served by holding a well-diversified, multi-asset portfolio based on sound financial planning principles and thorough research.
