Resilience of the world economy will continue to be tested in 2024: geopolitical and technological developments will make the difference
The World Economic Forum (WEF) released its January Chief Economists Outlook where explores key trends in the economic environment, including the prospects for growth and inflation, and the implications of recent geopolitical, industrial policy, and AI developments. The conclusions of the report are based on consultations and surveys with leading chief economists from both the public and private sectors.
Main findings of the report:
- Uncertainty about the economic outlook continues to cloud near-term economic developments: Although there are positive developments (easing inflationary pressures and advances in the field of artificial intelligence), businesses and policy-makers face persistent headwinds and continued volatility in an environment where global economic activity remains slow, financial conditions remain tight and geopolitical rifts and social strains continue to grow.
- 56% of chief economists expect the global economy to weaken over the next year, but another 43% foresee unchanged or stronger conditions.
- Growth momentum is slowing across regions but uneven patterns by region. The report echoes the International Monetary Fund forecast: a slight decline in global growth to 2.9% in 2024, down from 3% in 2023 pointing out that the relative resilience in global figures continues to rely on the growth performance of emerging economies, while the momentum in advanced economies is fading. The most buoyant economic activity is still expected in South and East Asia (China remains an exception). In the US, the outlook has weakened since September 2023, with about 60% expecting moderate or stronger growth this year. In Europe, 77% expect weak or very weak growth in 2024, while in Latin America and the Caribbean 70% expect moderate or stronger economic growth.
- Improvement in the inflation outlook for 2024, with expectations for high inflation being pared back across all regions.
- Geopolitical fragmentation and AI:
- 70% chief economists expect the pace of geoeconomic fragmentation to accelerate this year. The majority of respondents say it will stoke volatility in the global economy (87%) and in stock markets (80%).
- New era of industrial policy: Respondents are almost unanimous in expecting these policies to remain largely uncoordinated between countries.
- Respondents are notably more optimistic about AI-enabled benefits in high-income economies than in developing economies: Chief economists are almost unanimous (94%) in expecting productivity gains to become economically significant in high income economies in the next five years, compared to only 53% for low-income economies.