What does 2024 have in store for the economy? Leading chief economists give their views

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kateryna Karunska, Insight Specialist, Economic Growth and Transformation, World Economic Forum, Spencer Feingold, Digital Editor, World Economic Forum

• The global economy is expected to remain uncertain throughout 2024.
• The World Economic Forum’s latest Chief Economists Outlook finds that just over half of chief economists anticipate the global economy to weaken this year.
• Seven in 10 expect the pace of geoeconomic fragmentation to accelerate in 2024.

Uncertainty continues to be the name of the game for the economy in 2024.

For some economists, the global economy still looks rocky and could weaken further over the next year. But an only marginally smaller group foresees a steadying or improving economic outlook, according to the World Economic Forum’s January 2024 Chief Economists Outlook.

These clouds of uncertainty over the economic outlook have been a recurring theme over the past year. And with global economic activity remaining slow, financial conditions remaining tight and geopolitical tensions growing, much of the volatility is likely to remain this year.

The International Monetary Fund (IMF) forecasts a slight decline in global growth to 2.9% in 2024, down from 3% in 2023. However, much of this growth is made up of emerging markets activity, while growth in advanced economies remains tepid.

This said, inflation expectations have been pared back from their high levels across all regions. Economists also expect labour markets and financial conditions to loosen over the course of 2024.

Economists are divided over the performance of the economy in 2024. Image: World Economic Forum

Geoeconomic fragmentation

An area that does unite economists is the ongoing impact of geopolitical tensions, with almost seven in 10 saying that the pace of geoeconomic fragmentation will accelerate in 2024.

This is likely to stoke volatility in the global economy and stock markets in the next three years, the majority of economists believe. The experts also foresee an increase in localization, the strengthening of geoeconomic blocs and a widening divergence between the Global North and South over the next three years.

According to the IMF, potential loss in global economic output from increased trade restrictions could reach up to 7%, with low-income economies likely to bear a significantly greater cost – potentially reaching 4% of GDP – compared to advanced economies.

Geoeconomic fragmentation is likely to lead to increased volatility. Image: World Economic Forum

Diverging regional growth dynamics

There is already a divide in growth patterns across regions. Activity in South and East Asia is expected to continue to be buoyant. The outlier remains China, with growth predictions shifted from strong and moderate to largely moderate over 2024.

In Europe, the outlook has weakened significantly since the last Chief Economists Outlook in September 2023, with broadly weak or very weak expectations over the next 12 months. Growth expectations across the US and Middle East and North Africa have weakened too, and now about six in 10 foresee at least moderate growth in 2024 (down from 78% and 79%, respectively).

South and East Asia are likely to be the most buoyant economies in 2024. Image: World Economic Forum

Generative AI will shake things up

Since generative AI burst onto the scene in late 2022, the potential use cases for the technology have multiplied rapidly. By May 2023, economists were already highlighting how AI would cause significant shifts and new challenges for businesses and policymakers.

The most recent survey shows 50% of respondents expecting the technology to become disruptive by the end of 2024 (compared to 42% in 2023).

“AI’s accessibility and versatility not only suggest a broad impact across the sectors of an economy but possibly also a faster rollout than with past technological advances,” said Christian Keller, the Head of Economics Research at Barclays. “This could help advanced economies offset their lack of labour and emerging economies raise their workers’ productivity and income levels.”

Economists widely expect the impact of AI to be more strongly felt in advanced economies. Image: World Economic Forum

There is clear consensus that advanced economies will see benefits sooner – including gains in productivity – compared to lower-income countries. Notably, no respondent said productivity benefits will never materialize – reflecting an expectation of a far-reaching impact of the technology for the global economy.

Almost three-quarters of respondents expected AI to lead to acceleration in innovation in advanced economies this year. The slower pace of progress in low-income countries could widen the economic and technological divide.

“The advent of AI, notably generative AI, is part of the multifaceted transformation underpinning a new era of expansion for the global economy,” said Rima Bhatia, the Group Economic Adviser at Gulf International Bank. “It is already having profound consequences for economies and industries including the potential to increase automation, productivity growth, efficiency and data analysis.”

DISCOVER

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Reviving growth is necessary, but future growth models must be different

AI will be a hot topic at the Forum’s Annual Meeting in Davos, Switzerland. As will global economics, the rulebook for which has come to be questioned in recent years.

Many believe a new growth model is needed – one that balances the drivers of growth and productivity with the complexity of innovation, inclusion, sustainability and resilience. Davos 2024 provides a platform for the dialogue, research and collaboration needed to support this shift.

Moreover, during Davos 20204, international organizations, CEOs, policy-makers and economists will gather to design a two-year initiative for aligning on a new vision for growth. The meeting will also host dialogues on industrial strategies, the new high-rate reality, monetary policy decisions, the jobs outlook, city planning best practices, AI technologies and advancements in manufacturing.