More economic uncertainty on the horizon
More than half (56%) of chief economists expect the global economy to weaken in 2024, with seven in 10 saying the pace of geoeconomic fragmentation will accelerate.
The global economic outlook remains uncertain and subdued, with challenges stemming from tight financial conditions, geopolitical tensions, and rapid advancements in generative artificial intelligence (AI), as highlighted in the latest Chief Economist's Outlook.The report reveals that 56% of chief economists anticipate a weakening global economy in the coming year, while 43% foresee conditions remaining unchanged or strengthening. A substantial majority also predicts that labour markets (77%) and financial conditions (70%) will loosen in the upcoming year.
Despite a reduction in expectations for high inflation globally, regional growth prospects for 2024 vary significantly, with no region expected to experience very strong growth.
Saadia Zahidi, Managing Director of the World Economic Forum, underscores the precarious nature of the current economic environment, emphasising the urgent need for global cooperation to promote sustainable and inclusive economic growth.
Increasing divergence
The report points out the increasing divergence in economic conditions, with global inflation easing but growth stalling, financial conditions remaining tight, geopolitical tensions escalating, and inequality rising.
Regional variations in economic outlooks are evident, with South and East Asia and the Pacific region maintaining positive expectations. In contrast, Europe's outlook has significantly weakened, with 77% of respondents expecting weak or very weak growth. The United States, the Middle East and North Africa also face a weaker outlook, while Latin America and the Caribbean, sub-Saharan Africa, and Central Asia see a notable uptick in growth expectations.
Geopolitical rifts are identified as a compounding factor for uncertainty, with 70% of chief economists expecting an acceleration in geoeconomic fragmentation. Geopolitical factors are anticipated to increase volatility in the global economy (87%) and stock markets (80%), enhance localization (86%), strengthen geoeconomic blocs (80%), and widen the North-South divide (57%) in the next three years.
Policy tools
Governments' experimentation with industrial policy tools is noted, with experts expressing concern over the lack of coordination between countries. While two-thirds of chief economists expect these policies to spur new economic growth and industries, they also foresee rising fiscal strains (79%) and divergence between higher- and lower-income economies (66%).
The role of AI in the economic landscape is highlighted, with chief economists expecting varying benefits across income groups. There is optimism about AI's positive effects in high-income economies, predicting increased efficiency in output production (79%) and innovation (74%).
However, concerns arise about the potential negative impact on employment, particularly in low-income economies, with 73% not foreseeing a net-positive impact. Additionally, opinions are divided on the impact of generative AI on standards of living and trust.
In conclusion, the Chief Economists Outlook underscores the challenges facing the global economy, emphasizing the importance of international cooperation to navigate uncertainties and foster sustainable economic growth. The report provides insights into regional variations, geopolitical factors, and the role of AI, serving as a valuable resource for policymakers and business leaders.