International economic outlook

Summary

Forecast changes

• We have revised our global GDP forecast slightly higher from a month ago. We now believe the global economy grew an estimated 3.0% in 2023, while in 2024, we forecast global GDP growth to slow only modestly to 2.9%. Stronger growth trends in India, Mexico and Japan, and to a lesser extent the United States, account for the majority of the global growth upgrade.

• We have made some notable revisions to our outlook for global monetary policy, primarily reflecting lingering inflation concerns. We have pushed back our forecast timing for monetary easing from the Federal Reserve and European Central Bank, and now expect both central banks to deliver initial rate cuts in June. After the Bank of Japan (BoJ) delivered a rate hike in March, we expect another BoJ hike in October, and we now expect Brazil's central bank to ease monetary policy at a more gradual pace than previously. On the flip side, contained inflation means we see quicker Swiss National Bank rate cuts than our prior forecast.

• We have not made major changes to our currency forecasts this month, and still forecast a trend of broad and gradual U.S. dollar depreciation beginning later this year. Within the G10, we are slightly more positive on the euro and slightly less positive on the yen compared to last month. Among the emerging currencies, we remain optimistic on the prospects for the Mexican peso and Brazilian real, while we have turned more pessimistic on the outlook for the South African rand.

Key themes

• Global growth prospects are showing encouraging resilience with U.S. activity holding up in early 2024, the Eurozone and United Kingdom economies moving toward gradual recovery phases, and China's economy showing reasonably solid activity around the turn of the year. While U.S. growth may slow later this year as international growth trends firm, the global economy should hold up quite well overall. Our forecast of global GDP growth of 2.9% for 2024 is only slightly slower than the estimated 3.0% global GDP growth for 2023.

• Most G10 central banks have remained on the sidelines so far in 2024. While the Bank of Japan (rate hike) and Swiss National Bank (rate cut) moved in Q1, most major central banks are not expected to begin lowering policy rates until June or later. Divergences in monetary policy are most present in the emerging markets, where Latin American and EMEA central banks continue to ease monetary policy, while Asian institutions remain mostly on hold. We continue to believe developing central banks will proceed with rate cuts, albeit at a cautious pace.

• U.S. economic resilience and elevated Fed policy rates have supported the greenback in early 2024. Over the longer term, we still expect a trend of U.S. dollar deprecation to emerge as U.S. economic outperformance fades. In addition, we think Fed rate cuts combined with a U.S. soft landing and relatively benign financial market conditions should lead to an overall dollar downtrend against many G10 and emerging market currencies, with that trend persisting into mid-2025.

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