Leading economists have given business leaders a sneak preview of what this year has in store. The World Economic Forum (WEF) is underway in Davos, Switzerland, where business people, governments and lawmakers have gathered.
The WEF has conducted a survey based on the current economic environment. It’s set to give guidance to policymakers and industry leaders. It also helps shape responses to “compounding shocks to the global economy, from economic and geopolitical events,” states the report.
The survey was compiled with data collected from November to December 2023.
Global economy remains subdued
The WEF report has found that the global economic conditions remain subdued. Economists say more than half of them expect the global economy to weaken this year. However 20% believe the outlook is set to remain as is.
Nearly a quarter are optimistic, considering that the conditions would improve.
“These somewhat divided results highlight that the ambiguity that dominated the outlook over the last year continues to cloud near-term economic developments,” states the report.
The world economy’s resilience is expected to be further tested this year. If the COVID-19 pandemic was not enough, this year will be just another test of the time.
“Global economic activity is stalling with signs of slowdown in the manufacturing and services sectors. Tight financial conditions weigh on consumer and business sentiments, while fiscal and monetary policy-makers are assessing trade-offs and sequencing for careful policy calibration,” according to economists.
Economic impact on supply chain
The high interest rates are set to continue testing the resilience of economies this year.
Economists say that inflation remains vulnerable to commodity markets and supply chain shocks. “A prolonged disruption in the Red Sea, escalation of regional conflicts, excessive redundancy, and rising climate volatility weigh on the outlook. For example, the arrival of El Niño alone could increase global food prices by up to 9%.”
The majority of the economists who took part in the survey say an increase in globalization is unlikely over the next three years. “This is in line with the developments in supply chain strategies in recent years. [This is] marked by a notable shift in narrative and action to reshoring, nearshoring, friendshoring, and, more recently, de-risking strategies.”
The potential loss in global economic output from increased trade restrictions could reach up to 7% according to the IMF. “The signs of retreat are emerging, with global trade declining by 5% in 2023.”
Will there be more rupture of global supply chains due to geopolitical tensions in certain regions in the coming three years?
Chief economists are not agreeing on this. Only a few (36%) believe: “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.”
Growth expectations
Leading economists expect Asia to attract the “most buoyant economic activity” in 2024. However, no region is expected to experience robust growth in this period.
The outlook for South Asia, East Asia, and the Pacific remains positive and broadly unchanged. This compares to last year’s tabled survey, where 93% and 86% anticipated moderate or more substantial growth for South Asia and East Asia and Pacific, respectively.
“China is a notable exception as weak consumption, lower industrial production, and distress in property markets weigh on the prospects of a stronger rebound in 2024. The views of the chief economists have also shifted, with strong (19%) and moderate (38%) expectations in the previous survey replaced with largely moderate (69%) expectations for 2024,” quotes the report.
Tightening cycle may be nearing the end
“Global inflation continues to ease, propping expectations of mild ebbing in interest rates this year. The global headline rates of inflation are projected to reach 4.8%,14 a sharp decline from 5.9% in 2023 and 9.2% in 2022,” according to the report.
Core inflation is decelerating too, albeit at a slower pace. “[It] is expected to reach 4.5% in 2024.15 The
easing is reflected in the latest survey results, with expectations for high inflation being pared back across all regions.”
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Mia is a multi-award-winning journalist. She has more than 14 years of experience in mainstream media. She's covered many historic moments that happened in Africa and internationally. She has a strong focus on human interest stories, to bring her readers and viewers closer to the topics at hand.
