UN Lowers Global Growth Forecast for This Year from 2.5% to 2.4%

'2024 Global Economic Situation and Outlook' Report
Cumulative Monetary Tightening Over 2 Years
Reduced Investment and Consumer Spending
Lower Than IMF's 2.9% Forecast
US Revised Up to 1.4%, Japan to 1.2%
China Raised by 0.2%P to 4.7%
Korea's Private Investment Recovery at 2.4%
Higher Than Bank of Korea's 2.1% Forecast

The United Nations has downgraded its global economic growth forecast for this year to 2.4%. The UN observes that due to high-intensity monetary tightening by major countries, investment and consumer spending have decreased, leading to a slower global economic growth rate than initially expected. South Korea's economic growth rate is expected to rise from the 1% range last year to 2.4% this year.

[Image source=Yonhap News]

The UN Department of Economic and Social Affairs (DESA) presented a global economic growth forecast of 2.4% for 2024 in its "World Economic Situation and Prospects 2024" report released on the 4th (local time), which is 0.1 percentage points lower than the forecast made in May last year. This figure is also lower than the 2024 global economic growth forecast of 2.9% presented by the International Monetary Fund (IMF) in its October report last year.

The UN analyzed, "Although the global economy avoided the worst-case scenario of a recession last year, the likelihood of prolonged low growth has increased."

With the economy slowing mainly in advanced countries compared to last year, the UN expects the global economic growth rate this year to fall short of last year's growth rate (estimated at 2.7%).

By region, the United States is expected to record a growth rate of 1.4% this year, which is 0.4 percentage points higher than the previous forecast. The UN assessed that while the possibility of a hard landing for the US economy has decreased, it faces significant downside risks due to high interest rates, reduced household savings, and deteriorating conditions in employment, housing, and financial markets. Japan and China’s growth forecasts were both revised upward by 0.2 percentage points to 1.2% and 4.7%, respectively.

On the other hand, the European Union (EU) is expected to grow by 1.2%, down 0.3 percentage points from the previous forecast. The accumulated effects of tightening and the cessation of government fiscal support are analyzed to hamper economic growth. The United Kingdom’s forecast was also lowered by 0.7 percentage points to 0.4%. Emerging markets’ growth forecast was revised down by 0.2 percentage points to 4.0%.

South Korea’s economy, which grew by 1.4% last year (estimated), is expected to achieve a 2.4% growth rate this year. This is 0.3 percentage points higher than the 2024 growth forecast of 2.1% released by the Bank of Korea in November last year.

The report evaluated the South Korean economy, stating, "The slowdown in private consumption indicates that real wages have declined due to persistent high inflation," but also noted, "Despite tight monetary policy and rising financial costs, private investment recovered moderately in 2023, contributing to the upward revision of the 2024 growth forecast."

The UN expects the global economic growth rate to rise to 2.7% in 2025. However, it still projects that this will fall short of the pre-COVID-19 pandemic growth trend of 3.0%.

Global inflation is forecasted to slow down to 3.9% this year, following 5.7% in 2023 after peaking in 2022. However, the UN anticipates that the labor markets in advanced countries remain strong, making it unlikely that central banks in major countries such as the US and the EU will cut interest rates early this year.

The UN analyzed, "Rising nominal wage growth indicates persistent inflationary pressures," adding, "This discourages central banks from ending the monetary tightening cycle and shifting to a monetary easing cycle."

This content was produced with the assistance of AI translation services.