Year in review: Energy woes to AI boom, top global economic trends of 2024

From continuing energy market volatility driven by geopolitical tensions to the AI boom transforming industries, economic trends have been anything but predictable

In 2024, the global economy navigated a year marked by uncertainties and transformative shifts. From continuing energy market volatility driven by geopolitical tensions to the artificial intelligence (AI) boom transforming industries, economic trends have been anything but predictable. In this year-end review, let’s explore the key developments that defined the global economic landscape in 2024.

 

Inflation and monetary policy adjustments

 

Despite efforts by central banks, inflation remained above target in many economies. The US Federal Reserve implemented a 25 basis point rate cut but signalled a cautious approach to future reductions due to ongoing inflationary pressures. Similarly, the European Central Bank reduced rates, with inflation nearing 2 per cent.

 

 

In India, inflationary pressures persisted, largely driven by elevated food and energy prices. While the Reserve Bank of India kept its policy rates unchanged for the entire year, it adopted measures such as reducing Cash Reserve Ratio (CRR) to manage liquidity in the banking system.

 

The International Monetary Fund projected global growth to stabilise at 3.2 per cent for 2024 and 2025.

 

Robust performance of US equities

 

The US stock market showed resilience in 2024, with the S&P 500 up over 24 per cent by December 20, driven by effective inflation management and advancements in AI, led by companies like Nvidia.

 

The re-election of Donald Trump as US President was also perceived positively by the markets, with expectations of continued deregulation and business-friendly policies further fueling investor optimism.

 

Volatility in energy market

 

Geopolitical tensions, particularly in Ukraine and the Middle East, contributed to fluctuating oil and gas prices. Brent crude oil prices averaged $85 per barrel in 2024, compared to $82 in 2023, according to the International Energy Agency. The push for renewable energy accelerated, with a Bloomberg report stating that investments in solar and wind energy reached a record $500 billion globally.

 

In India, the renewable energy sector experienced unprecedented growth, with solar capacity additions surpassing 25 gigawatts in 2024. However, high crude oil prices strained India’s import bill, widening the trade deficit to $250 billion.

 

Trade policy uncertainties

 

The re-election of Donald Trump introduced uncertainties regarding trade policies, including potential tariffs and tax cuts. These policy considerations created an environment of uncertainty, influencing market volatility and investment decisions.

 

Trump, who is set to return to the Oval Office on January 25, 2025, rattled the global markets when he announced heavy tariffs on key trading partners — Mexico, Canada, and China. He also criticised India’s steep tariffs and warned of a reciprocal approach if these practices persist.

 

AI-driven productivity boost

 

Artificial intelligence (AI) emerged as a key driver of productivity across sectors, from manufacturing to financial services. According to McKinsey Global Institute, AI adoption contributed approximately $1.2 trillion to global GDP in 2024. Governments and corporations alike invested heavily in upskilling workforces to adapt to this technological shift. India positioned itself as a leader in the global AI race, with the government committing over $1.2 billion through the IndiaAI initiative to support its AI sector.