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Finance

World Economic Forum- Why Experts Expect Global Growth

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82% of chief economists expect the global economy to remain stable or strengthen this year – almost twice as many as in late 2023
Over two-thirds predict a sustained rebound of global growth, driven by technological transformation, artificial intelligence and the green transition.
There is near-unanimity that geopolitics and domestic politics will drive economic volatility this year. Read the May 2024 Chief Economist Outlook here

Geneva, Switzerland,May 2024 – The latest Chief Economists Outlook released today presents a growing sense of cautious optimism about the global economy in 2024. More than eight in ten chief economists expect the global economy to either strengthen or remain stable this year – nearly double the proportion in the previous report. The share of those predicting a downturn in global conditions declined from 56% in January to 17%.
 
But geopolitical and domestic political tensions cloud the horizon. Some 97% of respondents anticipate that geopolitics will contribute to global economic volatility this year. A further 83% said domestic politics will be a source of volatility in 2024, a year when nearly half the world’s population is voting.
 
“The latest Chief Economists Outlook points to welcome but tentative signs of improvement in the global economic climate,” said Saadia Zahidi, Managing Director, World Economic Forum. “This underscores the increasingly complex landscape that leaders are navigating. There is an urgent need for policy-making that not only looks to revive the engines of the global economy but also seeks to put in place the foundations of more inclusive, sustainable and resilient growth.”
 
Regional variations
 
Growth expectations have improved, though unevenly, across the globe. The survey reveals a significant boost in the outlook for the United States, where nearly all chief economists (97%) now expect moderate to strong growth this year, up from 59% in January.
 
Asian economies also appear robust, with all respondents projecting at least moderate growth in the South Asia and East Asia and Pacific regions. Expectations for China are slightly less optimistic, with three-quarters expecting moderate growth and only 4% predicting strong growth this year.
 
By contrast, the outlook for Europe remains gloomy, with nearly 70% of economists predicting weak growth for the remainder of 2024. Other regions are expected to experience broadly moderate growth, with a slight improvement since the previous survey.



A challenging landscape for decision-makers
 
The latest survey highlights the escalating challenges confronting businesses and policy-makers. Tensions between political and economic dynamics will be a growing challenge for decision-makers this year, according to 86% of respondents, while 79% expect heightened complexity to weigh on decision-making.
 
Among the factors expected to affect corporate decision-making are the overall health of the global economy (cited by 100%), monetary policy (86%), financial markets (86%), labour market conditions (79%), geopolitics (86%) and domestic politics (71%). Notably, 73% of economists believe that companies’ growth objectives will drive decision-making, almost double the proportion that cited the role of companies’ environmental and social goals (37%).
 
Long-term prospects and priorities
 
Most chief economists are upbeat about the prospects for a sustained rebound in global growth, with nearly 70% expecting a return to 4% growth in the next five years (42% within three years). In high-income countries, they expect growth to be driven by technological transformation, artificial intelligence, and the green and energy transition. However, opinions are divided on the impact of these factors in low-income economies. There is greater consensus on the factors that will be a drag on growth, with geopolitics, domestic politics, debt levels, climate change and social polarization expected to dampen growth in both high- and low-income economies.



In terms of the policy levers most likely to foster growth in the next five years, the most important across the board are innovation, infrastructure development, monetary policy, and education and skills. Low-income economies are seen as having more to gain from interventions relating to institutions, social services and access to finance compared to high-income economies. There is a notable lack of consensus on the impact for growth of environmental and industrial policies.
 
About the Chief Economists Outlook Report
The Chief Economists Outlook builds on the latest policy development research as well as consultations and surveys with leading chief economists from both the public and private sectors, organized by the World Economic Forum’s Centre for the New Economy and Society. It aims to summarize the emerging contours of the current economic environment and identify priorities for further action by policy-makers and business leaders in response to the compounding shocks to the global economy. The survey featured in this briefing was conducted in April 2024.
 
The Chief Economists Outlook supports the World Economic Forum’s Future of Growth Initiative, a two-year campaign aimed at inspiring discussion and action on charting new pathways for economic growth and supporting policy-makers in balancing growth, innovation, inclusion, sustainability and resilience goals. Learn more about the Future of Growth Initiative here.
The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. (www.weforum.org).
Finance

International Monetary Fund- World Economy Still Recovering

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The IMF announced today (Tuesday, April 11, 2023) in the World Economic Outlook’s press briefing that the baseline forecast for global output growth is 0.1 percentage point lower than predicted in the January 2023 WEO Update, before rising to 3.0 percent in 2024.

“The world economy is still recovering from the unprecedented upheavals of the last three years, and the recent banking turmoil has increased uncertainties.”

“We expect global output growth to fall from 3.4% last year to 2.8% in 2023, before rising to 3% in 2024, mostly unchanged from our January projections. Advanced economies are expected to see an especially pronounced growth slowdown from 2.7% in 2022 to 1.3% in 2023. Global headline inflation is set to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity prices but underlying core inflation is proving to be stickier. Importantly, this outlook assumes that recent financial stresses remain contained,” said Pierre-Olivier Gourinchas, the IMF’s Chief Economist.

Much uncertainty clouds the short- and medium-term outlook as the global economy adjusts to the shocks of 2020–22 and the recent financial sector turmoil. Recession concerns have gained prominence, while worries about stubbornly high inflation persist.

Chart- world economic outlook projections including Canada.

“Once again, risks are heavily tilted to the downside, they have risen with the recent financial turmoil. Most prominently, recent banking system turbulence could result in a sharper and more persistent tightening of global financial conditions. The simultaneous rate hikes across countries could have more contractionary effects than expected, especially as debt levels are at historical highs. There might be a need for more monetary tightening if inflation remains stickier than expected. These risks and more could all materialize at a time when policymakers face much more limited policy space to offset negative shocks, especially in low-income countries,” added Gourinchas.

With the fog around current and prospective economic conditions thickening, policymakers have a narrow path to walk towards restoring price stability while avoiding a recession and maintaining financial stability. Achieving strong, sustainable, and inclusive growth will require policymakers to stay agile and be ready to adjust as information becomes available.

“First, as long as financial stress is not systemic as it is now, the fight against inflation should remain the priority for central banks. Second, to safeguard financial stability, central banks should use separate tools and communicate their objectives clearly to avoid unwarranted volatility. Financial policies should remain laser focused on preserving financial stability and watch for any buildup of risks in banks, non-banks, and the real estate sectors. Third, in many countries fiscal policy should tighten to ease inflation pressures, restore debt sustainability, and rebuild fiscal buffers. Finally, in the event of capital outflows that raise financial stability risks, emerging market and developing economies should use the integrated Policy framework, combining temporary targeted foreign exchange interventions and capital flow measures where appropriate,” said Gourinchas.