Daily Spotlight: India Leads the Way in Global Growth

Summary

Global economic growth is expected to pick up slightly in 2025, according to the World Economic Outlook from the International Monetary Fund. The moderate acceleration is attributed largely to emerging markets, led by India and China, and also the expectation that global inflation will continue to moderate. In its recent report, the IMF notes “inflation is falling faster than expected in most regions.” The world economy is expected to expand 3.1% in 2024 and 3.2% in 2025. Though moving in the right direction, these rates are below the long-term historical global growth rate of 3.8%, due to the impact of inflation and higher interest rates. For industrialized economies (the U.S., Europe, Japan, etc.) growth is forecast at a low 1.5% in 2024, followed by 1.8% in 2025. The U.S. is expected to expand at a pace of 2.1% in 2024, followed by a positive but-somewhat-sluggish 1.7% in 2025. For emerging economies (China, India, Russia, Brazil, Saudi Arabia, etc.), forecasts call for 4.1% growth in 2024 and 4.2% in 2025. The clear leaders are expected to be India and China, with average growth for the two years of 6.5% and 4.6%, respectively, in 2024, with India expected to maintain that pace while China slows to 4.1% in 2025. These growth nations have different drivers: population growth in India and productivity growth in China. We factor these global growth forecasts into our asset-allocation models, and based in part on the slow global growth rates, we continue to recommend that investors over-weight portfolios toward U.S.-based securities. Global stocks generally represent value, but the risks to growth are high.

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