THE ECONOMIST: Global growth

I often tend to focus on the U.S. economy. Let’s explore some context by examining how other countries are faring. Rates of expansion around the world vary significantly, and a few points about current patterns are noteworthy.

The fastest growing nations in gross domestic product (GDP) are, as usual, observed among emerging regions. A mature industrial base cannot generally sustain the rates of increase seen in areas where there has historically been little activity and, thus, relatively small gains in absolute terms can generate large percentage changes.

According to the Organisation for Economic Co-operation and Development (OECD), the countries with the fastest GDP growth this year are expected to be India (6.2%), Indonesia (5.1%), China (4.7%), and Turkey (2.9%). These rates equal or exceed the forecast global increase of 2.9% (which is impressive). Some of those projections may not come to fruition (especially China, where there are notable structural issues), but these forecasts provide a useful yardstick.

The next few on the list are Mexico (2.5%), Saudi Arabia (2.4%), and Korea (2.2%). The United States has a projected 2024 increase according to the OECD of 2.1% (our forecast is modestly higher). Brazil, Russia, Spain, Australia, Japan, South Africa, and Canada round out the top 15. The outlook for the Euro area calls for only 0.6% expansion, with perennial powerhouse Germany at just 0.3%. The United Kingdom comes in at 0.7%.

The position of the United States among the top performing developed economies is notable, and the divergence between U.S. and European growth is striking. Although improvement for Europe is expected in 2025, the U.S. will continue to perform better.

One reason for this disparity is distance and some insulation from geopolitical tensions. For example, when Russia invaded Ukraine, a key source of natural gas for Europe (pipelines from Russia) was interrupted. Energy prices remain well above those in the U.S., due to both the loss of supply and complex challenges with the transition to green energy. In fact, the U.S. role as a net energy exporter has served it well as numerous disruptions have arisen around the world.

European taxes and costs are also generally higher, further constricting prospects by putting exporters at a competitive disadvantage on global markets. In addition, the U.S. has (1) generated a sizeable turnaround in productivity and (2) enjoyed more consumer engagement, partially resulting from its aggressive stimulus responses during the pandemic.

Both areas faced substantial interest rate increases and inflationary pressures, but the domestic situation has been moderating more rapidly. The U.S. economy has shown remarkable strength given the array of global challenges (though there are some signs of current slowing) and is better positioned for enduring progress than most parts of the world. Stay safe!