BIS Quarterly Review September 2024: A Snapshot of the Global Economy’s Resilience Amidst Uncertainties
The BIS Quarterly Review for September 2024 highlights the global economy’s resilience amidst ongoing uncertainties. Despite persistent geopolitical tensions, trade disputes, and
monetary policy adjustments
, the global economy remains on an upward trend. The
International Monetary Fund (IMF)
projects a steady expansion of the world economy, with growth forecasted to
reach 3.8% in 2024
and
surpass 4% the following year
. This optimistic outlook is largely attributed to the continued expansion of emerging markets, particularly in Asia.
Notwithstanding the robust growth, challenges remain. The
BIS Quarterly Review
emphasizes that downside risks persist, with the primary concerns being a potential
slowdown in China
, intensifying trade tensions, and
financial instability
. The ongoing recovery in the Eurozone and Japan, however, offers some relief.
Inflation remains a concern for many central banks. The
European Central Bank (ECB)
is expected to start tapering its stimulus measures as early as 2025, while the
Bank of Japan (BoJ)
is under pressure to do the same. The
United States Federal Reserve
(Fed) has already raised interest rates multiple times and is expected to continue doing so.
The BIS Quarterly Review also addresses the issue of debt sustainability. With public debt at record levels in several advanced economies, concerns regarding their ability to meet interest payments persist. The
European Union (EU)
‘s next long-term budget will be a crucial test of its commitment to debt sustainability.
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Business International Settlements (BIS) Quarterly Review: September 2024
Introduction: The Business International Settlements (BIS) Quarterly Review is an essential and highly anticipated publication in the realm of global economic analysis. Its role and significance lie in providing valuable insights into the global economy’s performance, assessing its resilience, and identifying emerging trends and challenges. With the current global economic landscape fraught with uncertainties due to various geopolitical and macroeconomic factors, this
quarterly review
aims to shed light on the global economy’s resilience during the September 2024 period.
Role and Significance: In an increasingly interconnected and complex global economy, it is crucial to assess the economy’s resilience amidst uncertainties. The BIS Quarterly Review offers a comprehensive and authoritative analysis of key trends, challenges, and developments in the international economic landscape. It provides valuable insights into the global economy’s overall health, offering essential information to policymakers, investors, and academics alike.
Global Economic Landscape:
The global economic landscape in September 2024 is shaped by various factors, including geopolitical tensions, trade disputes, and macroeconomic instability. Some of the most pressing issues include the ongoing US-China trade war, Brexit negotiations, and the economic impact of the COVID-19 pandemic.
Impact of Geopolitical and Macroeconomic Factors:
The impact of these factors on the global economy is far-reaching. For instance, the US-China trade war has led to increased uncertainty and volatility in financial markets, while Brexit negotiations continue to cast a shadow over Europe’s economic future. Furthermore, the ongoing COVID-19 pandemic has resulted in significant disruptions to global trade and supply chains, leading to increased uncertainty regarding the global economic recovery.
Thesis Statement:
This quarterly review will provide an in-depth analysis of the global economy’s resilience during the September 2024 period. It will examine key trends and challenges, offering valuable insights into the global economic landscape and helping stakeholders navigate the complex and uncertain world of international finance and economics.
Global Economic Overview: Key Indicators
Gross Domestic Product (GDP) growth rate
The global economic landscape has been shaped by varying Gross Domestic Product (GDP) growth rates among major economies. In 2021, the United States recorded a robust GDP growth of 6.4%, marking a significant rebound from the pandemic-induced recession. Conversely, the European Union (EU)
(excluding UK)
registered a growth rate of merely 4.2%, reflecting the ongoing challenges posed by Brexit and the gradual recovery from the crisis. The People’s Republic of China
(PRC)
continued to lead the world with a 8.5% growth rate, demonstrating its resilience and adaptability in the face of global uncertainties.
Inflation and interest rates
Inflation
Central bank monetary policies
Central banks have played a crucial role in managing inflation, with the US Federal Reserve raising its benchmark interest rate (three times) in 2021 to combat rising prices. The European Central Bank (ECB)
1.a
introduced a gradual tapering of its asset purchase program, while the Bank of Japan (BoJ)
1.b
maintained its accommodative stance, keeping interest rates near zero.
Impact on currency values and trade
2.a
The diverging monetary policies among major economies have led to considerable fluctuations in currency values, with the US dollar gaining strength against the euro and the Japanese yen.
2.b
These changes have also influenced global trade patterns, as importers and exporters grapple with currency risks and adjust their strategies accordingly.
Employment and labor market conditions
Unemployment rate and trends
1.a
The US labor market showed signs of improvement, with the unemployment rate dropping to a 3.9% in 2021.
1.b
Meanwhile, the EU experienced a more sluggish recovery, with an average 7.3% unemployment rate across its member states in 2021.
Wage growth and income distribution
2.a
In the US, average hourly earnings grew by 4.7%, outpacing inflation and boosting household income. However, wage growth in the EU remained lackluster, with an average increase of only 2%.
2.b
These disparities in wage growth and income distribution have widened the gap between developed economies, highlighting the need for targeted policies to address economic inequality.
I Regional Analysis:
Overview of Economic Trends in Each Region:
Europe:
Europe’s economy showed a modest recovery in 2021, with an estimated real Gross Domestic Product (GDP) growth rate of around 4.3%, according to the European Central Bank. However, inflation rates remained high, averaging at about 2.6% in 2021, which led to an increase in interest rates in some European countries. The region faces ongoing challenges from geopolitical issues, particularly those related to Brexit and Russia-Ukraine tensions.
Asia-Pacific:
The Asia-Pacific region continued to be the world’s fastest-growing major economy, with an estimated 6.1% real GDP growth rate in 2021, according to the Asian Development Bank. However, rising inflation rates, averaging at around 3.5%, and increasing interest rates posed challenges for some countries in the region. Trade tensions, particularly between China and the United States, remained a significant concern.
Americas:
The Americas region, which includes North and South America, experienced uneven economic recovery in 202The United States recorded a robust 6.4% real GDP growth rate, according to the World Bank, while Brazil and other Latin American countries faced slower growth rates due to ongoing economic challenges. Inflation remained a concern in some countries, with rates averaging around 5.6%.
Africa:
Africa’s economy grew by an estimated 3.6% in real terms in 2021, according to the World Bank. Despite this growth, the region continued to face significant challenges from geopolitical instability, trade tensions, and demographic pressures. Inflation rates averaged around 7.9%, and interest rates remained high in some countries to contain inflation.
5. Middle East:
The Middle East region’s economic recovery was uneven in 2021, with some countries experiencing strong growth and others facing ongoing challenges. Real GDP growth rates varied widely, from around 3% in Iran to 6.8% in Qatar. Inflation remained a concern, averaging around 5.4%, and geopolitical tensions continued to impact the region’s economies.
Analysis of Regional Challenges and Opportunities:
Geopolitical Issues and Trade Tensions: Geopolitical issues and trade tensions continued to pose significant challenges for several regions in 202The ongoing Brexit negotiations, Russia-Ukraine tensions, and trade disputes between the United States and China were major concerns for Europe, Asia-Pacific, and other regions.
Case Studies of Notable Countries Within Each Region:
Policy Responses to Economic Challenges: Several countries within each region adopted different policy responses to address their economic challenges. For example, Germany implemented a fiscal stimulus package in response to the COVID-19 pandemic and focused on renewable energy and digitalization to drive growth. Meanwhile, India responded to its economic challenges by focusing on infrastructure development and implementing reforms to attract foreign investment.
Success Stories and Lessons Learned:
Some countries within each region experienced significant success stories in 2021, providing valuable lessons for other countries. For example, South Korea’s successful response to the COVID-19 pandemic through a combination of aggressive testing, contact tracing, and quarantine measures helped the country maintain strong economic growth. Meanwhile, Chile’s focus on renewable energy and digitalization helped it recover from the pandemic faster than many other countries in Latin America.
Trade and Finance: Globalization and Monetary Policies
Overview of global trade landscape
Globalization has significantly transformed the trade landscape, with key trading blocs and agreements shaping the flow of goods and services across borders.
Analysis of key trading blocs and agreements
The World Trade Organization (WTO) has been a major platform for international trade negotiations since its establishment in 1995. Meanwhile, regional trading agreements like the European Union (EU), North American Free Trade Agreement (NAFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have influenced trade patterns within their respective regions.
Impact of technological advancements on trade patterns
Technological advancements, particularly the rise of e-commerce and digitalization, have revolutionized global trade. The ease of cross-border transactions has led to an increase in international trade volume, with small businesses and developing countries benefiting from increased access to global markets.
Monetary policies and their implications for the global economy
Monetary policies play a crucial role in managing inflation, growth, and financial stability within economies.
Central bank actions to address inflation, growth, and financial stability
Central banks use various tools such as interest rates, open market operations, and forward guidance to influence monetary conditions. For instance, tightening monetary policy through higher interest rates can help combat inflation, while loosening monetary policy through lower interest rates can stimulate economic growth.
Analysis of potential policy conflicts and coordination efforts
Coordination among central banks is essential to maintain financial stability in the global economy. However, policy conflicts can arise when monetary priorities diverge between countries, potentially leading to currency fluctuations or economic instability. For example, during periods of quantitative easing, significant liquidity injections can lead to capital outflows from emerging markets and exchange rate volatility.
Impact on capital flows, exchange rates, and global debt levels
The relationship between trade, finance, and monetary policies has significant implications for capital flows, exchange rates, and global debt levels.
Capital flows
Capital flows are influenced by interest rate differentials between countries. When interest rates in one country are higher than another, capital tends to flow toward the higher-yielding asset. This can lead to currency appreciation or depreciation depending on the country’s current account balance.
Exchange rates
Exchange rate movements can impact trade competitiveness and inflation, making exchange rate stability an important consideration for monetary policymakers. Central banks may engage in foreign exchange interventions to influence their respective currencies’ values.
Global debt levels
The interaction between trade, finance, and monetary policies can also affect global debt levels. For example, capital inflows from foreign investors can lead to increased borrowing and higher levels of debt in the recipient country. Monetary policies aimed at managing inflation or stabilizing exchange rates can impact debt servicing costs, making it essential for central banks to consider the potential implications of their actions on global debt levels.
Sustainability and Inequality: Climate Change and Social Challenges
Overview of the global sustainability agenda
The global sustainability agenda has gained significant momentum in recent decades, with a growing recognition of the need to address environmental challenges, particularly climate change, while ensuring social equity and economic development.
Progress towards climate goals and green technologies
Progress has been made in this regard, with many countries committing to reduce their carbon emissions and transition to renewable energy sources. For instance, link. Moreover, advancements in green technologies such as solar panels, wind turbines, and electric vehicles are making renewable energy sources increasingly cost-competitive with fossil fuels.
Role of international organizations and initiatives
International organizations and initiatives, such as the United Nations, World Bank, and Paris Agreement, have played a crucial role in driving the global sustainability agenda. These bodies provide a platform for collaboration between countries, facilitate knowledge exchange, and support the implementation of sustainable development projects.
Analysis of socio-economic challenges
Socio-economic challenges, including income inequality and lack of access to education, pose significant obstacles to sustainable development.
Impact on economic growth and stability
Income inequality can hinder economic growth and stability by limiting consumer spending power, creating social unrest, and discouraging investments. Furthermore, a lack of access to quality education can perpetuate intergenerational cycles of poverty.
Policy measures to address these challenges
To address these challenges, many countries have implemented policy measures aimed at reducing income inequality and improving access to education. For instance, progressive taxation systems can help redistribute wealth, while investments in public education can lead to long-term economic gains.
Case studies of countries with successful sustainability and inequality reduction strategies
Countries like Costa Rica, Denmark, and Ethiopia have demonstrated success in both sustainability and inequality reduction efforts. In Costa Rica, for example, the government has prioritized renewable energy development while implementing social safety net programs to address poverty. Denmark, renowned for its green technologies and strong welfare state, consistently ranks high in sustainability and social indicators. Ethiopia has focused on expanding access to education and healthcare while pursuing ambitious infrastructure projects.
VI. Conclusion: Global Economic Outlook and Future Challenges
In the
BIS Quarterly Review September 2024
, key findings highlight a recovering global economy, with
inflationary pressures
persist due to supply chain disruptions and energy prices.
Looking ahead,
future challenges
loom large:
Geopolitical risks and policy uncertainties
The ongoing Ukraine-Russia conflict, US-China trade tensions, and potential interest rate hikes by central banks could disrupt global growth.
Technological advancements and demographic changes
Automation and artificial intelligence could lead to significant job losses, while an aging population in many countries will put pressure on pension systems and social welfare.
Call to action for continued collaboration and innovation in addressing global economic challenges
To mitigate these risks, it is crucial that policymakers, businesses, and international organizations work together to promote free trade, sustainable growth, and social safety nets. Encouraging innovation through education, research, and investment in new technologies can also help create jobs and drive growth.