Recent International Economic Issues

Some recent international economic issues include:

Financial conditions: Financial conditions are tightening in most regions.  

War: The war between Russia and Ukraine has triggered an energy and food crisis. 

COVID-19 pandemic: The COVID-19 pandemic has hurt the global economy, especially low-income households.

 Inflation: Inflation has increased significantly in several countries across the world. Between the third quarters of 2020 and 2022, median global inflation soared from 1.9 percent to 8.8 percent, complicating monetary policy normalization.

 Trade tensions: Trade tensions are escalating, which could lead to higher interest rates for longer.  

Fiscal challenges: Small states are facing fiscal challenges due to the COVID-19 pandemic and the global shocks that followed.  

Cost of living crisis: The cost of living crisis is a major issue for the global economy. The cost of living crisis is when the cost of everyday essentials like groceries and bills increases faster than average household incomes. In February 2023, 3 out of 4 consumers globally were worried about the rising cost of everyday expenses. The ‘cost of living crisis’ is now a familiar phrase as prices of everyday goods have increased dramatically in recent years. In the U.S., prices remain high while consumer prices have been increasing around the world, too, with average global inflation at 6.8% in 2023. In Europe, Food prices have increased rapidly, with milk prices in the EU increasing by 43% and rice prices increasing by 68%. The cost-of-living crisis lingers on despite recent declines in inflation. High prices of essential goods and services have become a pressing issue for the poor and vulnerable in Asia and the Pacific despite decent economic growth and declining inflationary trends so far in 2024. India is entering into a major cost of living crisis due to multiple domestic and international crises, which included soaring food and energy prices, rising poverty, joblessness, endangered food security, disincentives to farmers growing food articles, and lopsided policy interventions.

Climate change: Climate change is about much more than temperatures. What we witnessed in 2023, especially with the unprecedented ocean warmth, glacier retreat, and Antarctic sea ice loss, is cause for particular concern. The consequences of climate change now include, among others, intense droughts, water scarcity, severe fires, rising sea levels, flooding, melting polar ice, catastrophic storms, and declining biodiversity.

According to the IMF, the baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Core inflation is generally projected to decline more gradually.