Global Developments in 2024

The global economy remained stable in 2024, driven by easing inflationary pressures and recovery in global trade. Despite facing multiple headwinds, advanced economies managed to achieve a ‘soft landing’ underpinned by sustained consumer spending amid easing inflation and a resilient labour market. Growth within advanced economies were mostly supported by the United States (US), while growth in the Eurozone remained subdued. Meanwhile, emerging economies continued to support global growth, underpinned by strong private consumption in India and an acceleration in growth in ASEAN countries backed by the recovery in external demand. Nevertheless, China’s economic recovery slowed with increasing deflationary risks due to the withstanding property crisis, tepid domestic demand and trade frictions with other major economies.

While growth proved resilient, the global economy also experienced headwinds in 2024, including volatility in currency and capital flows, rising political uncertainty due to multiple elections around the world, heightened trade tensions among major economies, and continued geopolitical tensions. Moreover, the mixed global economic data and the slower disinflation in the US compared to the other major economies added complications to monetary policy decisions from major central banks, raising concerns over a potential global economic downturn.

The International Monetary Fund (IMF) in its World Economic Outlook report in October 2024 forecasted global growth to expand at a slower pace of 3.2% in 2024 from 3.3% in 2023, with narrowing divergences. Nevertheless, Asia Pacific remained as a global growth driver, with the IMF foreseeing growth in the region to expand by 4.6% in 2024 (2023: 5.0%).

chart 1

Global financial stress levels heightened in August 2024, amid recession concerns in the US and the unwinding of the
yen carry trade

OFR Global Financial Stress Index (FSI) and Malaysia FSI

Notes: The Global FSI is from the Office of Financial Research, US Department of Treasury, while the Malaysia Financial Stress Index (MFSI) is internally estimated following similar methodology (see Monin, 2017). Value of FSI above zero indicates higher than historical average financial stress in the economy.

Source: US Office of Financial Research, the SC’s internal estimates.

Global financial markets performance gained momentum in 2024, as investors priced in optimism over potential interest rate cuts by major central banks, while corporate earnings remained favourable. The progress of easing inflation and growth prospects across major economies shaped investors’ expectations surrounding the path of global monetary policy, which resulted in cross-border portfolio fund flows that created additional volatility to the financial market. The level of global financial stress surged in August 2024, amid recession concerns in the US and the unwinding of the yen carry trade following Bank of Japan’s unexpected move to raise its key interest rate in late July. However, financial stress moderated after a series of encouraging US economic data releases that helped to alleviate concerns of a recession, buoying the performance of the global financial markets towards the end of the year (Chart 1).

On the performance of global equity markets, the MSCI World Index rose by 16.99% in 2024, while the MSCI Emerging Market Index trailed the global benchmark, rising 4.96%, reflecting China’s sluggish economic growth, and continuing trade tensions with the US. In September 2024, India’s weight in the MSCI AC World IMI Index rose to 2.4%, higher than China’s weight of 2.2%, representing a shift in investors’ preference to new emerging market growth engines. Meanwhile, global bond indices improved in 2024, driven by continued dovish monetary policy expectations throughout most of the year amid easing global inflationary pressures (Chart 2).

CHART 2

Global equities and bonds performances improved in 2024

Source: Refinitiv Eikon Datastream; the SC’s calculations.