Asia-Pacific and MEA to experience economic contractions in 2024

DUBAI: The ongoing fluctuations in global economic forecasts for 2024 reveal a multi-dimensional landscape marked by both regional disparities and nuanced complexities.

According to data from GlobalData, two regions—Asia-Pacific (APAC) and the Middle East & Africa (MEA)—are projected to experience a decrease in economic growth relative to previous predictions.

Specifically, the APAC region faces a downward revision of 0.08 percentage points to a growth rate of 2.59 per cent, while the MEA region sees a more significant decline of 0.25 percentage points, setting its growth forecast at 3.57 per cent.

In contrast, optimistic upward revisions in the growth projections for the Americas and Europe signal resilience amid a tumultuous global economic climate.

Arnab Nath, Associate Project Manager at GlobalData, highlights that the ongoing conflicts, volatility in oil markets, and disruptions in shipping within the MEA region have significantly hampered economic performance.

“These factors not only stymie local businesses but also impact international trade and the investment climate. The effects of geopolitical instability are particularly pronounced in the Middle East, where conflicts have had pervasive ramifications on economies dependent on oil production and export. Furthermore, supply chain disruptions—exacerbated by these conflicts—pose additional barriers for businesses within the region.”

Similarly, the APAC region grapples with its own set of challenges that have prompted downward revisions in growth projections.

China raises concerns

The slowdown in China’s economy, a significant driver of regional growth, has raised concerns about its ripple effects throughout the region. Domestic challenges, such as rising debt levels, regulatory uncertainties, and a cooling real estate market, have added to the economic malaise.

Additionally, heightened geopolitical tensions—including trade disputes and military posturing within the region—add layers of uncertainty that inhibit foreign investment and consumer confidence. These intertwined factors create a precarious economic situation in APAC, which has traditionally been viewed as a bastion of growth.

Conversely, Nath said that the Americas and Europe are experiencing a more favourable outlook characterised by upward revisions in their growth forecasts.

The Americas’ projection has seen an increase of 0.11 percentage points, now anticipated to grow at a rate of 2.16 per cent, driven by robust consumer spending and easing inflationary pressures.

The rejuvenation of domestic investments, alongside rising real incomes, paints a positive picture for economic resilience.

Similarly, Europe has experienced an upward adjustment of 0.21 percentage points, with projections indicating a growth rate of 1.38 per cent.

Reduction in inflation rates

“Such improvements are largely attributed to stable wage growth, lower inflation, and recent monetary policy adjustments by the European Central Bank, which has created an environment conducive to economic activity,” Nath said.

GlobalData has revised the global economic growth forecast for 2024 to 2.52 per cent, marking a slight increase of 0.05 percentage points from its earlier projections.

A significant factor underlying these optimistic projections is the reduction in inflation rates, which is expected to decline from 5.8 per cent in 2023 to 4.5 per cent in 2024 across the globe. The decline is anticipated to occur uniformly across various regions, providing a semblance of relief to consumers and businesses alike.

The Americas, excluding countries grappling with hyperinflation such as Argentina and Venezuela, are projected to see their inflation rate drop to 5 per cent, down from 7.5 per cent.

Asia-Pacific will likely experience a decrease from 6.9 per cent to 5 per cent, while Europe’s inflation rate is set to fall from 7.8 per cent to 4.3 per cent.

Encouragingly, the MEA region expects a significant drop in its inflation rate, projected to fall to 22.1 per cent from an astonishing 27 per cent.

Notably, the backdrop of geopolitical events—such as the upcoming 2024 election cycle—will likely further influence economic trajectories through changes in trade policies, investment incentives, and regulatory frameworks.

Despite the macroeconomic challenges faced by the Asia-Pacific and Middle East & Africa regions in 2024, Nath said the global economic outlook remains cautiously optimistic.

“The slight upward revision in global growth forecasts reflects a complex interplay of recovering key economies and evolving market dynamics. The robust three per cent annual growth witnessed by the United States in the second quarter of 2024 is illustrative of underlying resilience, while the Eurozone has experienced its strongest expansion in over a year.”