Inflation and Geopolitical Tensions: Key Challenges for the Global Economy in December 2024
In December 2024, the global economic landscape is significantly impacted by inflation and geopolitical tensions. These factors are creating substantial challenges for economies worldwide.
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Inflation
Inflation remains a critical issue, with various reports indicating that it is a major economic hurdle. The OECD reported that year-on-year inflation was broadly stable at 4.5% in October 2024, compared to 4.4% in September. This stability is attributed to falling energy prices and the unwinding of supply chain bottlenecks, although recent spikes in oil prices could pose new challenges.Forecasts suggest that inflation will continue to be a concern in 2025. The OECD projects that average consumer price inflation should be 3.1% in 2024 and 2.2% in 2025. Similarly, the IMF forecasts a gradual reduction in global core inflation, which is expected to remain sticky at around 3% in 2024. This indicates that while there is a trend towards lower inflation rates, the process is slow and uneven.
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Geopolitics
Geopolitical tensions are another significant factor affecting the global economy. These tensions are leading to increased trade protectionism, particularly between the US and Greater China, which is expected to intensify in 2025. Such protectionist measures can disrupt global supply chains, increase costs, and create uncertainties in the trading environment.The Philippines is maintaining economic strength despite these geopolitical challenges, which underscores the resilience of some economies in the face of global tensions. However, the broader impact of geopolitical risks is evident in the slowing global growth rates and the increased politicization of economic policies.
Economic Outlook
The economic outlook for 2025 reflects these dual challenges. The IMF projects a continuation of global economic growth at 3.2% during 2024 and 2025, but this growth is accompanied by higher inflation and geopolitical risks. Vanguard's economic outlook for 2025 highlights the need to address these challenges, particularly the impact of inflation and geopolitical tensions on economic stability.In summary, inflation and geopolitical tensions are key hurdles for the global economy in December 2024. These factors are influencing economic policies, trade relations, and growth prospects, making it crucial for policymakers to navigate these challenges effectively.
