Global economy expected to weaken in 2024, says World Economic Forum report

Global financial prospects stay subdued and fraught with uncertainty, in accordance to the most recent Chief Economists Outlook launched on Monday (January 15, 2024) as the worldwide economy continues to grapple with headwinds from tight monetary situations, geopolitical rifts and fast advances in generative synthetic intelligence (AI).

More than half of chief economists (56%) anticipate the worldwide economy to weaken this yr, whereas 43% foresee unchanged or stronger situations. A powerful majority additionally consider labour markets (77%) and monetary situations (70%) will loosen over the approaching yr. Although the expectations for top inflation have been pared again in all areas, regional progress outlooks range extensively and no area is slated for very robust progress in 2024.

“The newest Chief Economists Outlook highlights the precarious nature of the present financial surroundings,” mentioned Saadia Zahidi, Managing Director, World Economic Forum. “Amid accelerating divergence, the resilience of the worldwide economy will proceed to be examined in the yr forward. Though international inflation is easing, progress is stalling, monetary situations stay tight, international tensions are deepening and inequalities are rising – highlighting the pressing want for international cooperation to construct momentum for sustainable, inclusive financial progress.”

Regional variations

The outlook for South Asia and East Asia and Pacific stays optimistic and broadly unchanged in contrast to the final survey, with a powerful majority (93% and 86% respectively) anticipating not less than reasonable progress in 2024. China is an exception, with a smaller majority (69%) anticipating reasonable progress as weak consumption, decrease industrial manufacturing and property market considerations weigh on the prospects of a stronger rebound.

In Europe, the outlook has weakened considerably for the reason that September 2023 survey, with the share of respondents anticipating weak or very weak progress virtually doubling to 77%. In the United States and the Middle East and North Africa, the outlook is weaker too, with about six in 10 respondents foreseeing reasonable or stronger progress this yr (down from 78% and 79% respectively).

There is a notable uptick in progress expectations for Latin America and the Caribbean, sub-Saharan Africa and Central Asia, though the views stay for broadly reasonable progress.

Geopolitical rifts compound uncertainty

About seven in 10 chief economists anticipate the tempo of geoeconomic fragmentation to speed up this yr, with a majority saying geopolitics will stoke volatility in the worldwide economy (87%) and inventory markets (80%), enhance localisation (86%), strengthen geoeconomic blocs (80%) and widen the North-South divide (57%) in the following three years.

As governments more and more experiment with industrial coverage instruments, specialists are almost unanimous in anticipating these insurance policies to stay largely uncoordinated between nations. While two-thirds of chief economists anticipate industrial insurance policies to allow the emergence of latest financial progress hotspots and very important new industries, a majority additionally warn of rising fiscal strains (79%) and divergence between higher- and lower-income economies (66%).

AI takes the highlight

Chief economists anticipate AI-enabled advantages to range extensively throughout earnings teams, with notably extra optimistic views in regards to the results in high-income economies. A powerful majority mentioned generative AI will enhance effectivity of output manufacturing (79%) and innovation (74%) in high-income economies this yr.

Looking on the subsequent 5 years, 94% anticipate these productiveness advantages to develop into economically vital in high-income economies, in contrast to solely 53% for low-income economies.

Almost three-quarters (73%) don’t foresee net-positive influence on employment in low-income economies and 47% mentioned the identical for high-income economies. The views are considerably extra divided on the chance of generative AI to enhance requirements of residing and to lead to a decline in belief, with each being barely extra possible in high-income markets.