[World Economic Outlook] KIEP "Next Year Growth Rate: US 1.5%, Europe 1.1%"

KIEP Announces '2024 Global Economic Outlook' on the 14th

A national research institute has issued a diagnosis that the growth outlook for major countries next year is bleak. The Korea Institute for International Economic Policy (KIEP) projected the United States' growth rate for next year at 1.5%, and the European Union's at 1.1%. In the case of China, it is expected to grow by only 4.5% due to delays in the recovery of the real estate market. The diagnosis indicates that growth is slowing down due to the combined burden of high inflation and high interest rates.

On the 14th, KIEP analyzed this in its "2024 World Economic Outlook." By country, the growth rate forecast for the U.S. this year was raised from the May forecast (1.2%) to 2.4%. However, the growth rate for next year is expected to remain lower at 1.5%.

Attention was drawn to the fact that consumer spending continues to increase steadily despite the burden of inflation levels still higher than before the pandemic. The labor market, which has driven consumption activation, is also analyzed to be steady without significant changes. However, the burden of high interest rates affecting the overall economy is seen as a concern. Additionally, it was analyzed that high government debt and interest burdens, along with fiscal policy uncertainty caused by political instability within the U.S., are expanding.

The European Union (EU) growth rate forecast was lowered from 0.8% to 0.5%. It is expected to grow by only 1.1% next year as well. The diagnosis states that domestic demand remains sluggish due to continued burdens of high inflation and high interest rates following the Russia-Ukraine war. With weakened growth momentum caused by a decrease in trade volume due to the global economic downturn, there is even a possibility that Germany, which holds a significant share in the European economy, will experience a negative growth rate of 0.4% this year.

Japan's growth rate forecast for this year was raised from 1.4% to 1.9%. However, it is expected to slow down to a 1.0% growth rate next year. A growth trend centered on domestic demand is emerging as regular employment increases and household income rises, and signs of external growth are also increasing with more automobile exports and inbound tourists. However, due to inflation and pressure from a weak yen exchange rate, the Bank of Japan is allowing long-term interest rates to rise, and discussions on an exit strategy from monetary easing policies are underway, raising concerns about growth constraints.

China's growth rate forecast for this year was revised downward by 0.2 percentage points to 5.3%. Next year, growth is expected to be lower at 4.5%. This is because the economic recovery expected from China's reopening has not materialized as anticipated, and the delayed recovery of the real estate market is manifesting as an economic slowdown. Although the Chinese government expressed a strong determination to resolve issues related to the real estate market and local government debt at the Central Financial Work Conference last October, it was diagnosed that this will affect medium- to long-term changes.

India's growth rate forecast for this year was raised to 6% from the previous 5.2%. It is expected to grow by 6.2% next year as well. The diagnosis states that a stable political and financial environment has been established, and India is enjoying the greatest benefits from the fragmentation of the international community. Major domestic and foreign companies aiming to diversify global supply chains are increasing investments in India, leading to growth in manufacturing investment.