 "56% of chief economists expect global economy to weaken in 2024: WEF report")
More than half (56 per cent) of chief economists expect the global economy to weaken in 2024, with most saying the pace of geo-economic fragmentation will accelerate, according to the latest ‘Chief Economists Outlook’ released on Monday at the World Economic Forum.
The report indicates that the global economic prospects remain subdued and uncertain. Challenges include tight financial conditions, geopolitical rifts, and the rapid development of generative artificial intelligence (AI).
Forty-three per cent of chief economists predict unchanged or improved conditions, while a significant majority expect labour markets (77 per cent) and financial conditions (70 per cent) to relax in the coming year. Despite regional variations in growth forecasts, no region is expected to experience very strong growth in 2024, although there has been a reduction in high inflation expectations across all regions.
“Amid accelerating divergence, the resilience of the global economy will continue to be tested in the year ahead. Though global inflation is easing, growth is stalling, financial conditions remain tight, global tensions are deepening and inequalities are rising – highlighting the urgent need for global cooperation to build momentum for sustainable, inclusive economic growth,” said Saadia Zahidi, managing director, World Economic Forum.
The economic outlook for South Asia and East Asia and Pacific remains positive and largely consistent with previous surveys, with the majority expecting at least moderate growth in 2024 (93 and 86 per cent, respectively). However, China's outlook is more cautious, with 69 per cent predicting moderate growth due to weak consumption, decreased industrial production, and concerns in the property market.
In Europe, the economic forecast has significantly deteriorated since September 2023, with 77 per cent of respondents anticipating weak or very weak growth. The outlook in the United States and the Middle East and North Africa has also dimmed, with approximately 60 per cent predicting moderate or stronger growth this year, a decrease from 78 and 79 per cent, respectively. However, growth expectations in Latin America and the Caribbean, sub-Saharan Africa, and Central Asia have improved, with predictions pointing towards moderate growth.
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About 70 per cent of chief economists believe that geo-economic fragmentation will intensify this year. Many suggest that geopolitical factors will contribute to volatility in the global economy and stock markets, promote localisation, strengthen geo-economic blocs, and expand the North-South divide over the next three years.
With governments increasingly utilising industrial policy tools, there is a near-unanimous expectation of continued lack of coordination between countries. While two-thirds of chief economists foresee these policies fostering new economic growth areas and vital industries, concerns remain about rising fiscal pressures and disparities between higher- and lower-income economies
Generative AI is expected to have varied impacts across income groups. Most chief economists are optimistic about its efficiency and innovation benefits in high-income economies this year. In the next five years, 94 per cent anticipate these productivity advantages to become economically significant in high-income economies, in contrast to just 53 per cent in low-income economies.
Almost three-quarters do not expect a net-positive impact on employment in low-income economies, and similar views are held for high-income economies. Opinions are more divided regarding generative AI's potential to elevate living standards and its impact on trust, with both outcomes being slightly more probable in high-income markets.