Global Economic Growth Projected Slowing to 2.9%, from 3.1% in 2023

"Geopolitical tensions remain elevated, shaped by ongoing conflicts in the Middle East, the protracted war between Russia and Ukraine, and a noticeable cooling in relations between Western democracies and China," said the report.

"These developments are occurring simultaneously, adding layers of complexity and uncertainty to the global landscape," it added. "In such a volatile environment, political events gain heightened importance."

The IIF said the US general election in November stands out as the most significant political event of this year on a global scale, as its outcome could have "far-reaching" implications for both domestic and international policy, influencing many areas from trade relations to military engagements.

The association of international financial institutions added that global economic activity is projected to decelerate, largely due to weakening economic performance in major economies like the US and China.

"In the United States, the effects of the Federal Reserve’s aggressive past monetary tightening are expected to lead to a slowdown in corporate hiring, suppressing household income growth and curtailing consumer spending," the report said.

Although the IIF estimates inflation in the US easing significantly to around 2.4% this year, down from 3.7% last year, it said inflationary risks still remain in the world's largest economy in its services sector and wage growth, which could keep inflation slightly above target.

The IIF expects the Fed to deliver two additional 25 basis points of rate cuts in November and December.

"Similarly, China’s economic momentum has faltered, with recent data highlighting a broadbased slowdown across key sectors," said the report.

The association projects China's economic growth slowing to 4.7% in 2024, down from 5.2% in 2023, driven by continued softness in domestic demand, especially in consumer spending and real estate, which have struggled to gain momentum despite support.

"However, the Chinese government is expected to deploy additional fiscal stimulus and further monetary easing in the second half of 2024 to support growth, aiming to keep the economy close to its official target," the report said.

"While these measures may help stabilize activity, structural challenges such as aging demographics, high youth unemployment, and ongoing tensions with the United States are likely to constrain China's growth prospects over the medium term," it added.

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