The Economist has identified the best economies of the year and explained why some succeeded and others failed
31 December 14:21
The global economy is generally on track to finish 2024 well. According to the IMF, global GDP will grow by 3.2%. Inflation has declined and employment growth remains stable. However, there are big differences between countries. This is stated by The Economist, offering its analysis and detailed rating, Komersant ukrainskyi reports.
To assess the differences between the economies of the countries, analysts of the British edition collected data on five economic and financial indicators of 37 countries that are members of the Organization for Economic Cooperation and Development: GDP, stock market performance, core inflation, unemployment, and government budget deficit, then ranked each economy based on its performance to create a composite score, and finally identified the best economies of the outgoing year.
Top 10 best economies in 2024
Analyzing the results, analysts note that the Mediterranean rally has continued for the third year in a row, and this year Spain topped the list. Greece and Italy, which once symbolized the troubles of the eurozone, continue to recover steadily. Ireland, which has attracted many tech companies, and Denmark, home of Novo Nordisk and Ozempic, round out the top five. Meanwhile, the Nordic weightlifters are disappointing, given the poor results of the UK and Germany. The Baltic duo of Latvia and Estonia are back at the bottom, in the same position as in 2022.
GDP swings
Real GDP growth is considered to be the most reliable indicator of the overall health of the economy. This year, global GDP was supported by a resilient US economy and its consumers spending freely.
In Spain, annual GDP growth is expected to exceed 3%. This is becoming an economic reality thanks to a strong labor market and high levels of immigration, which mechanically increase economic production. Although the country’s GDP per capita has also grown, it is not as significant as the overall figure. Israel’s strong GDP growth largely reflects a recovery from a sharp decline in the last quarter of 2023, when its fight against Hamas began.
Elsewhere, growth was unsatisfactory. Germany and Italy were hampered by high energy prices and sluggish industries. Japan is expected to show a meager 0.2% growth, weighed down by a weakened tourism industry and problems in the automotive sector. Hungary and Latvia have slipped into recession.
An impressive stock market
U.S. stocks delivered a whopping 24% inflation-adjusted return as valuations of tech companies, already high, climbed even higher. Canada’s market, closely tied to its southern neighbor, also posted strong gains, supported by strong performances in the energy and banking sectors. Japan’s Nikkei 225 index reached a record high, even if its overall annual performance was average. There were some losers. Stock prices in Finland are in negative territory in real terms, and the South Korean stock market fell after the president’s failed attempt to resolve the political crisis.
Volatile inflation
Although global inflation has declined significantly, prices for services remain high in many countries. In the UK, wage growth continues to push up service costs, which means an uncomfortable rise in core inflation. Germany is facing similar pressures. In Australia, rising housing costs are one of the culprits. Inflation in Turkey remains rampant. By contrast, France and Switzerland have managed to contain price pressures, with core inflation comfortably below 2%.
The labor market is almost stable
A classic marker of economic distress is rising unemployment. This was predicted by many when central bankers began to raise interest rates and artificial intelligence became more sophisticated. However, despite some easing, labor markets remain resilient and unemployment is near record lows. In Southern Europe, where unemployment is still high, there has been a tangible improvement, with unemployment in Greece, Italy and Spain falling to their lowest levels in a decade. Italy has made the most progress, with unemployment down 1.4 percentage points since the beginning of the year. In the United States and Canada, where unemployment rose slightly, this trend is largely due to high levels of immigration and the fact that labor demand is growing.
Debt burden will remain manageable
After years of heavy spending, many countries need to think about how to keep their debt manageable. Denmark and Portugal stand out for achieving rare budget surpluses thanks to fiscal discipline. Norway and Ireland also boast surpluses, although for different reasons: Norway because of oil revenues, and Ireland because of corporate tax revenues, bolstered by multibillion-dollar tax payments from tech giant Apple.
Most governments, however, continue to spend money. Poland’s primary deficit exceeded 3% of GDP due to increased defense spending in response to Russia’s war in Ukraine. In Japan, significant fiscal stimulus aimed at supporting the economy and easing cost-of-living pressures risks exacerbating debt problems as the era of ultra-low interest rates comes to an end. The UK’s debt trajectory is deteriorating, with its latest budget failing to restore public finances. France is mired in political turmoil and unable to contain spending.
What’s next
On the threshold of 2025, the global economy is facing new challenges. Almost half of the world’s population lives in countries where elections were held this year, many of which elected leaders who can be called “unpredictable.” Trade is under threat, public debt is rising, and there is little room for error in stock markets. For now, at least, Spain, Greece, and Italy, long humiliated by their northern neighbors, can celebrate their economic revival. According to The Economist, they deserve to celebrate.
