McKinsey Global Institute: 2024 in charts

The geometry of global trade is changing. MGI analysis of the geopolitical distance of trade found wide variation. From 2017 to 2023, China, Germany, and the United States reduced the geopolitical distance of their trade by 4 to 10 percent each. Over the same period, Brazil and India have traded more broadly across the geopolitical spectrum. However, the decline in the geopolitical distance of trade among major economies does not eliminate the possibility of a fragmentation scenario, in which trade between geopolitically distant economies collapses.

Creating a low-emissions energy system while expanding energy access globally requires solving “the hard stuff.” Today, about 10 percent of the technologies needed to meet global commitments to reduce emissions by 2050 have been deployed. For the remaining 90 percent, we identified 25 physical challenges, “the hard stuff,” linked to the development and deployment of low-emissions technologies and the infrastructure and supply chains they need to operate and accelerate deployment.

Investing in productivity growth can spur the economic growth that supports higher living standards. Productivity in the median economy has jumped sixfold in the past quarter century, but there is variation. Thirty emerging economies, home to 3.6 billion people, are in the “fast lane” of improvement. If they maintained their pace, they would converge to advanced-economy productivity levels within roughly the next quarter century. “Middle lane” economies would take more than a hundred years, while “slow lane” ones would never converge. At the same time, advanced-economy productivity has slowed by about one percentage point since the global financial crisis. Directed investment in areas such as digitization, automation, and artificial intelligence could fuel new waves of productivity growth in advanced and emerging economies, which is the best way to continue improving well-being and prosperity around the globe.

Micro, small and medium-size enterprises, or MSMEs productivity lags behind that of larger firms across the countries with wider gap in emerging economies.

Shoring up the Europe’s competitiveness across seven arenas ranging from energy to technology and supply chains could increase value added by €500 billion to €1 trillion by 2030, which is three to six times the incremental annual investment needed to achieve net zero. Closing this gap will enable Europe to grow and thrive while preserving its unrivaled model for sustainability and inclusion.

Achieving economic empowerment would allow a quarter billion people around the world to live better lives. In wealthier countries, higher costs and inequality prevent about 20 percent of the population on average from crossing the “empowerment line,” the threshold above the international poverty line at which people can afford a standard basket of essential goods and services and begin to save.

Insufficient investment compromises Europe’s competitiveness, way of life, and standing in the world. US investment in intellectual property and equipment is double that of Europe per capita, and Europe’s pool of venture capital assets is just one-quarter of the US total. Today, returns on invested capital are four percentage points higher in the United States than in Europe. Reducing barriers to investment, such as energy costs, talent shortages, business and labor market regulation, and geo- and macroeconomic uncertainty, can give Europe a pulse on its competitiveness and help attract capital.

Labor markets in advanced economies today are among the tightest in two decades, a long-term trend that may continue as workforces age. MGI estimates that GDP in 2023 could have been 0.5 to 1.5 percent higher across the world’s eight largest economies if employers had been able to fill their excess job vacancies. Companies and economies need to find new ways to expand the workforce if productivity is to continue to grow, with steps like more flexible work, tailored migration programs, and initiatives to keep seniors at work longer and attract more women into the workforce.

AI can address changes in employment demand linked to efforts to achieve net-zero emissions, an aging workforce, and growth in e-commerce, but it also will require new skills.  Surveyed executives expressed a need for skills they report are in short supply, such as advanced IT and data analytics, as well as for critical thinking, creativity, and teaching and training.

Eight arenas, unique categories of industries distinguished by high growth and dynamism, could reshape the global economy, generating $29 trillion to $48 trillion in revenues by 2040. These arenas, which include AI software and services, cybersecurity, air mobility, obesity drugs, and industrial and consumer biotechnology, could increase as a share of global GDP from 4 percent today to 10 to 16 percent by 2040.

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