Global economy set to ‘weaken’ in 2024: WEF report

Around 56% of chief economists expect the global economy to weaken over the next year, but another 43% expect “unchanged or stronger conditions”, the January 2024 ‘Chief Economists Outlook’ launched today by the World Economic Forum (WEF) shows.

The WEF report highlights "positive developments" such as "easing inflationary pressures" and advances in "artificial intelligence" (AI), but raises concerns over "persistent headwinds" for businesses and policy-makers as the global economic activity remains slow, and financial conditions remain tight and geopolitical rifts and social strains continue to grow.

The WEF Annual Meeting 2024, which is taking place on 15-19 January in Davos-Klosters, Switzerland, is convening the world’s foremost leaders under the theme, “Rebuilding Trust” this year.

Region-wise, the WEF expects the most buoyant economic activity in South and East Asia. The only exception is China where strong and moderate growth expectations will be replaced with "largely moderate (69%) expectations for 2024", says the report.

In the US, the Middle East and North Africa, the outlook has weakened since the September 2023 edition of the Chief Economists Outlook, with about six out of ten respondents expecting “moderate or stronger growth” this year. In Europe, 77% expect weak or very weak growth in 2024.

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

“Although the expectations for high inflation have been pared back in all regions, regional growth outlooks vary widely and no region is slated for very strong growth in 2024,” says the report.

The current edition of the outlook focuses on two key phenomena impacting the global economy – geopolitical developments and advancements in generative AI. “Almost seven out of ten chief economists expect the pace of geoeconomic fragmentation to accelerate this year. The majority of respondents say it will stoke volatility in the global economy (87%) and in stock markets (80%).”

There appears to be an 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 in the next three years.

The WEF report says growing global fragmentation is closely intertwined with the resurgence in industrial policies. “About two-thirds 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%).”

The rapid advances in the field of artificial intelligence put it on top of business and policy agendas in 2024. “Respondents 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%).”

The WEF report says chief economists 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.