At the World Economic Forum in Davos, global leaders are digesting the implications of recent political changes, especially following Trump's inauguration. While initial fears of a trade war with China have eased, concerns about escalating conflict loom large over the world economy. Macroeconomic trends reveal a potential return to growth, with the IMF projecting only slight deviations from pre-pandemic rates. However, underlying issues such as rising unemployment in the US, deflation in China, and stagnation in Europe signal fragility in this recovery, complicated by potential structural shifts in US trade policy.
As the last five years have been the most macro-economically shocking in modern history, will this tumultuous period end with a gentle return to normal?
The IMF projects 2024 global growth at 3.2%, slightly below the 2010-2019 median of 3.5%, with 2025 growth at 3.3%.
Alarming changes in unemployment in the US, deflation in China, and stagnation in Europe underlie the fragile economic recovery despite seemingly steady growth numbers.
The focus on reducing trade deficits in the US could disrupt its role as a major provider of global demand, affecting both Europe and China.
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