Since peaking in 2022, global inflation has shown steady signs of easing. The International Monetary Fund (IMF) forecasts that global inflation will decrease to 5.8% in 2024 and further to 4.4% in 2025. According to the World Economic Outlook, inflation rates in most countries are now approaching central bank targets, creating a favorable environment for major central banks to consider easing monetary policy. These trends have contributed to a relatively stable global economy, although there are still regional variances in economic performance.
According to the World Economic Outlook, the outlook for the world economy varies significantly. The U.S. economy has performed slightly better than anticipated, while Europe faces a slow growth, particularly in manufacturing countries like Germany. In contrast, emerging markets in Asia, particularly China and India, are expected to maintain robust growth driven by investments in technology and artificial intelligence. However, some regions have to struggle due to issues such as supply chain disruptions, political instability, and extreme weather events that hinder growth and recovery.
(Source: IMF)
Since the Industrial Revolution, energy demand has closely paralleled economic growth. However, studies from McKinsey suggest that global demand for fossil fuels may gradually decrease, signaling a shift in the relationship between economic growth and energy consumption. This change is influenced by several factors. First, the energy intensity per unit of GDP has decreased significantly, especially in fast-growing economies like China that are transitioning from industrial to service-oriented economy. Second, advances in technology and growing environmental awareness have led to significant energy efficiency gains, as people increasingly adopt energy-saving practices. Additionally, the adoption of energy-efficient technologies, such as LED lighting and smart buildings, has further reduced demand. Third, the growth in renewable energy capacity, particularly wind and solar, has helped flatten the primary energy demand curve, easing reliance on fossil fuels.
(Source: Resonai)
The need for an energy transition is becoming more pronounced. New energy types are increasingly diverse and can improve energy efficiency, reduce costs, and decrease pollution. According to McKinsey, renewable energy offers several significant advantages. Renewables not only support the goal of reducing greenhouse gas emissions, but they also provide cost-effective alternatives to traditional fuels, particularly in areas with abundant sunlight or wind. Moreover, renewable energy sources offer energy security by reducing dependence on imported fossil fuels, helping stabilize economies against volatile fuel prices.
A recent report from the International Energy Agency (IEA) indicates that the world has entered a new industrial era led by clean energy technologies. This shift is fueled by interest rate cuts in major economies and steady economic growth, which are expected to increase investments in clean energy projects. Many governments are supporting renewable energy projects through tax incentives, subsidies, and infrastructure investments to overcome economic challenges and modernize their power grids. However, the renewable energy and transformer industries still face short-term challenges. Rising inflation has increased the costs of essential raw materials, such as copper, aluminum, and steel, which are crucial for building wind turbines, solar panels, and transformers. Additionally, economic and geopolitical tensions impact global supply chains, making it more difficult to procure parts and materials for renewable installations and transformer production.
In this global shift towards clean energy, no country can stand alone. International trade plays a critical role in supporting a rapid transition to renewable energy. Governments worldwide need to strengthen and diversify clean energy supply chains to ensure a sustainable shift. Each country should strategically leverage its unique resources, strengths, and weaknesses to benefit from the opportunities presented by the green economy. By doing so, nations can capitalize on the potential of renewable energy, fostering sustainable growth that benefits both the economy and the environment.