Chief economists divided over global economy outlook in 2024

Chief economists from all over the world are divided over whether the global economy will weaken this year, with 56% of them expecting the global economy to weaken, while 43% foresee unchanged or stronger conditions, illustrating that uncertainty still dominates the outlook for near-term economic developments.

The Chief Economists Outlook is a quarterly briefing based on the latest policy development research as well as consultations and surveys with leading chief economists from the public and private sectors, organised by the World Economic Forum’s Centre for the New Economy and Society.

Thirty chief economists provided their feedback for the survey conducted in November and December 2023.

While the chief economists noted positive developments, such as easing inflationary pressures and advances in the field of artificial intelligence (AI), they said businesses and policymakers face persistent headwinds and continued volatility as global economic activity remains slow, financial conditions remain tight and geopolitical rifts and social strains continue to grow.

Broken down into regions, the results highlighted diverging growth patterns, with the most buoyant economic activity still expected in South and East Asia, although China remains an exception, with the previous combination of strong and moderate growth expectations replaced with largely moderate (69%) expectations for 2024.

In the US, Middle East and North Africa, the outlook has weakened since the September 2023 edition, with about six out of 10 respondents expecting moderate or stronger growth this year. In Europe, 77% expect weak or very weak growth in 2024. Elsewhere in the world, the expectations are for broadly moderate growth.

The survey results reflect the improvement in the inflation outlook for 2024, with expectations for high inflation pared back across all regions. The majority also expect that labour markets (77%) and financial conditions (70%) will loosen.

For Sub-Saharan Africa, 35% of the respondents expect weak economic growth while 36% expect high inflation.

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Global economic resilience will also be tested in 2024

The economists expect that the relative resilience of the world economy in the recent years will continue to be tested entering 2024, with global economic activity stalling with signs of slowdown in the manufacturing and services sectors.

They say the economic backdrop is marked by protracted weakness in global growth and widening divergence.

The International Monetary Fund (IMF) forecasts a slight decline in global growth to 2.9% in 2024, down from 3% in 2023, while the relative resilience in global figures continues to rely on the growth performance of emerging economies, while the momentum in advanced economies is fading.

In addition, the chief economists believe that the interest rate tightening cycle may be nearing the end as global inflation continues to ease, propping up expectations of mild ebbing in interest rates this year. According to the IMF, the global headline rates of inflation are projected to reach 4.8%, a sharp decline from 5.9% in 2023 and 9.2% in 2022.

This edition of the outlook focuses on two key phenomena affecting the global economy: geopolitical developments and advancements in generative AI. Almost seven out of 10 chief economists expect the pace of geoeconomic fragmentation to accelerate this year, with the majority of respondents saying it will stoke volatility in the global economy (87%) and in stock markets (80%).

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Geopolitical rifts compound uncertainty

It also seems like there is equally strong consensus that recent geopolitical developments will increase localisation (86%) and strengthen geoeconomic blocs (80%). Almost six out of ten (57%) also expect it to increase inequality and widen the North-South divide over the next three years.

According to the outlook growing global fragmentation is closely intertwined with the resurgence in industrial policies. About two-thirds of the chief economists expect these policies to enable the emergence of new economic growth hotspots and vital new industries, with the majority warning of rising fiscal strains (79%) and divergence between higher- and lower-income economies (66%).

Respondents are almost unanimous in expecting these policies to remain largely uncoordinated between countries, with a different mix of defensive and enabling approaches in high- and low-income economies.

The outlook points out one notable point of disagreement among the chief economists: the likelihood that geopolitical tensions will result in a significant rupture of global supply chains in the next three years.

Only 36% of respondents think potential disruptions are likely, another third are uncertain and a third believe they are unlikely. This is likely to reflect in part the effectiveness of restructuring strategies and increased resilience of supply chains in recent years.

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Advancements in generative AI

Generative AI’s place at the top of business and policy agendas this year is due to the rapid advances in the field of artificial intelligence. Chief economists are notably more optimistic about AI-enabled benefits in high-income economies than in developing economies, including an increase in the efficiency of output production (79%) and innovation (74%), with a more mixed picture regarding standards of living (57%).

They 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. The views are somewhat more divided on the likelihood of generative AI resulting in a decline in trust across high income (56%) and low-income (44%) economies this year.

Positive predictions about the economic gains from AI have been accompanied by broad-based anxiety about the possible societal, job and inequality implications of the technology.