China Poised to Surpass G7 Nations as Leading Driver of Global Economic Expansion

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According to a recent report by Bloomberg, China is expected to lead the world’s economic growth for the next five years, surpassing the collective growth of all G7 countries. The International Monetary Fund (IMF) forecast indicates that China’s share of new economic activity is projected to reach 21% by 2029, exceeding the G7’s 20% and almost double that of the United States’ 12%. The report further reveals that the top four countries, namely China, India, the United States, and Indonesia, will contribute more than 50% of global growth, whereas the remaining 75% will come from 20 countries.


Bloomberg Economics forecasts suggest that Canada and Italy, both G7 members, are anticipated to contribute less than one per cent to global growth over the next few years. This contribution is significantly lower compared to countries like Bangladesh and Egypt, where population growth is a significant driving force behind the economic boom. 


The IMF’s World Economic Outlook (WEO) report, released recently, upgraded the global economic growth forecast for this year to 3.2%, which is 0.1 percentage points higher than its projection in January. The IMF’s chief economist, Pierre-Olivier Gourinchas, stated that despite the gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. During the 2024 Spring Meetings of the IMF and World Bank, Gourinchas mentioned that most indicators point to a soft landing, and the global economy shows less economic scarring from the crises of the past four years.


However, the IMF report highlights that low-income developing countries will still face significant challenges, as many of them are yet to recover from the pandemic’s impact and other cost-of-living crises. The IMF estimates that decisive actions are necessary to overcome these challenges. The latest forecast for global growth five years from now, at 3.1%, is at its lowest in decades, according to the WEO report. The IMF predicts that global headline inflation will fall from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies.


The report identifies various downside risks, such as new price spikes due to geopolitical tensions, including those from the Ukraine crisis and the Gaza-Israel conflict. These spikes, along with persistent core inflation, could raise interest rate expectations and reduce asset prices. The report further warns that a divergence in disinflation speeds among major economies could cause currency movements that put financial sectors under pressure. Additionally, high-interest rates could have greater cooling effects than envisaged as fixed-rate mortgages reset and households contend with high debt, causing financial stress. 

Source: CGTN.

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