India, China to Germany and UK: How major economies performed in 2024

While India and US have optimistic outlooks going into 2025, Germany and UK may see sluggish growth

As 2024 reaches an end, the global economic landscape has demonstrated resilience, albeit with a mix of cautious optimism and lingering uncertainties. Here is a look at how the six biggest economies of the world, in terms of gross domestic product (GDP) - the United States, China, Japan, Germany, India, and the United Kingdom - performed this year.

 

Global economic outlook

 

Latest forecasts released by the International Monetary Fund (IMF) on October 22, states that the global growth is expected to remain stable but subdued. The IMF also noted that the "battle against inflation" has largely been "won", marking a significant shift in the global economic recovery. However, the Organisation for Economic Co-operation and Development (OECD), in its December 4 update, cautioned that while the global economy has remained resilient, “risks are casting a shadow” over the outlook.

 

 

It projects a slight uptick in global GDP growth to 3.3 per cent in 2025, with OECD economies seeing modest growth and emerging Asia continuing to drive much of the global expansion. Here is a country-wise look at how the world's six largest economies performed in 2024.

 

India’s economic resilience

 

Indian Economy | Image: Bloomberg

India, currently the world’s fifth-largest economy with a GDP of $3.89 trillion, has shown remarkable resilience in 2024, despite challenges like high inflation and global uncertainties. The World Bank projected India’s growth to continue at 7 per cent in FY25, with sustained strength in the following years. This positions India on track to become the third-largest economy in real GDP by 2030.

   

In addition to strong GDP growth, India’s economic performance is bolstered by substantial foreign exchange reserves and record foreign direct investment (FDI) inflows. The country's rising prominence on various international economic indexes further shows its growing influence on the global stage.

 

However, India also faced several challenges despite strong economic performance. Inflation remained a concern, with retail inflation reaching 6.21 per cent in October due to rising food and fuel prices, pushing up costs for consumers. This was exacerbated by FMCG companies announcing price hikes of 5-20 per cent to cover increased commodity costs.

 

Additionally, GDP growth showed signs of slowing, with the Reserve Bank of India revising the FY25 GDP forecast down to 6.6 per cent from 7.2 per cent. While the economy showed resilience, slower consumption and inflationary pressures require cautious optimism.

 

US economic growth steady amid challenges, fed cuts rates

 

Photo: Bloomberg

The US economy remains solid in 2024 despite challenges like high interest rates, inflation, and a cooling labour market. The IMF predicts the US will outperform other G7 nations, but sectors like housing and manufacturing have struggled with high borrowing costs, while rising delinquencies signal financial strain.

 

Wage growth outpaced inflation, supporting household spending, while the Federal Reserve cut rates in September, concerned about the labour market. Inflation progress stalled, with the Personal Consumption Expenditures (PCE) price index up 2.8 per cent in November. Mortgage rates have risen again, and contractors are offering incentives.

 

Manufacturing also faced challenges, with job cuts in durable goods manufacturing. The outlook remains cautious as the economy navigates ongoing pressures.

 

China: Weak domestic demand slows growth

Photo: Bloomberg

  China’s economy grew by 4.8 per cent in the first three quarters of 2024, but growth has slowed since Q2, affected by weak domestic demand and a struggling property sector. The government has implemented stimulus measures to support short-term demand while aiming for long-term financial stability.

 

The World Bank forecasts China’s growth at 4.9 per cent in 2024, slowing to 4.5 per cent in 2025. Despite policy easing, weak household and business confidence, high debt levels among developers, and an aging population will continue to constrain growth. The property sector’s challenges and local government debt remain key concerns.

 

China’s economic risks include domestic issues like the property downturn and labor market weakness, along with global trade uncertainties. However, higher fiscal spending and decisive policy actions could boost growth beyond current projections.

 

The World Bank also highlights the importance of improving economic mobility to reduce rural-urban divides and income inequality. While China’s middle class has expanded, about 55 per cent of the population remains economically insecure. Expanding opportunities for upward mobility is crucial for achieving common prosperity and fostering sustainable, consumption-driven growth.

 

Germany: Economy contracted in 2024, weak growth forecasts

 

Germany trade (Photo: Reuters)

Germany’s economy faced significant challenges in 2024, leading to a contraction for the second consecutive year. The Bundesbank projected a 0.2 per cent decline in real GDP for 2024, attributed to persistent economic headwinds and structural issues. In Q3 2024, GDP showed modest growth of 0.1 per cent, driven by increased household and government consumption. However, investment in machinery and equipment fell by 4.1 per cent, and exports declined by 0.2 per cent, highlighting weaknesses in trade and investment.

 

The labour market weakened in 2024, with vacancies down 23 per cent, though real wages increased by 2.3 per cent. Inflation eased to 2.4 per cent in October, with further decreases projected in 2025 and 2026.

 

Inflation has eased significantly, standing at 2.4 per cent in October 2024, down from 11.6 per cent in October 2022, primarily due to lower energy prices. Inflation is projected to average 2.4 per cent in 2024, and further ease is expected in 2025, with overall inflation projected to be 2.1 per cent in 2025 and 1.9 per cent in 2026.

 

The government deficit is expected to decrease to 2.2 per cent of GDP in 2024, and debt is forecast to stabilise at around 63 per cent of GDP through 2026.

 

The outlook for 2025 remains weak, with the Bundesbank forecasting only slight GDP growth. The OECD has revised its growth forecast for Germany down to 0.7 per cent, citing political uncertainty and strict fiscal policies. Domestic demand is expected to become the main driver of growth in 2025 and 2026, supported by easing monetary policy and lower financing costs. However, high energy costs are expected to continue affecting energy-intensive industries, with net exports contributing slightly negatively to growth, the European Commission report released in November said.

 

Japan: Wage growth expected in 2025 amid challenges

Japan Economy (Photo: shutterstock)

 

In 2024, Japan's economy exhibited modest growth, with the IMF revising its growth forecast downward to 0.3 per cent, citing supply issues in the automotive sector and diminishing benefits from a surge in tourism.

 

Despite these challenges, certain sectors showed resilience. The manufacturing sector, for instance, demonstrated signs of stabilisation. In December, the au Jibun Bank Japan manufacturing purchasing managers' index (PMI) rose to 49.6, indicating the mildest contraction in three months, with softer reductions in production and new order intakes.

 

Additionally, the Nikkei 225 stock index achieved its highest year-end close since 1989, driven by significant gains in major companies and increased shareholder returns.

 

Looking ahead, the IMF anticipates a rebound in 2025, projecting growth of 1.1 per cent, supported by rising real wages that are expected to boost consumption.

 

The Bank of Japan (BOJ) shares this optimistic outlook, with Governor Kazuo Ueda expressing expectations for the economy to move closer to achieving its 2 per cent inflation target next year. This suggests that the timing for the next interest rate hike is approaching, though caution is advised due to uncertainties in global economies.

 

Furthermore, Japan's government anticipates the economy will reach full capacity in the next financial year (starting on April 1, 2025) for the first time in seven years, driven by a tight labour market.

 

UK: No signs of growth in Q3 but improved 2025 forecasts

 

UK economy | Photo: Bloomberg

The UK economy showed no growth in the third quarter (Q3) 2024 that ended on September 30, revised down from an initial 0.1 per cent increase, the Office of National Statistics said in its latest report. The services sector stagnated, while construction rose 0.7 per cent, and production fell 0.4 per cent. Real GDP per head declined by 0.2 per cent compared to Q3 2023.

 

Despite these setbacks, UK GDP in Q3 2024 was 3 per cent higher than pre-pandemic levels.

 

The OECD has also upgraded its 2024 UK GDP growth forecast to 1.7 per cent from 1.2 per cent, helped by increased public spending. The IMF also raised its 2024 GDP growth forecast to 1.1 per cent, but UK growth lags behind global peers, with the US growing at 11.5 per cent.

 

Inflation is expected to moderate but remain elevated due to persistent services price pressures. Fiscal challenges persist, with high public debt and increased spending pressures from an aging population and climate transition. The government must reform tax policy, boost business investment, and address weak employment growth, especially from long-term sickness.

 

The UK is advancing in reducing greenhouse gas emissions, but faster progress in decarbonising housing is essential for achieving net-zero targets. Expanding green financing products could help households invest in energy-efficient measures.