Global economy to weaken in 2024 - World Economic Forum

Towards the last quarter of each year, The World Economic Forum (WEF) makes predictions of how the world economy would fare in the coming year based on consultations with leading economists from around the world. The report is then published in a publication called the Chief Economists Outlook

The leading economists have worked together with WEF and produced a number of global economy predictions for the year 2024. This report published in September 2023, predicts that 2024 would be a year that the world economy will weaken the more. The top economists have made the prediction based on various aspects of economy as they were within the last six months before the publication was made (September 2023).

Now Lets consider some of the key drivers of this slow economic growth predicted for 2024.

Politics, labor markets and other factors to weaken global economy

Check out the chart below. It contains 6 economic factors that are believed would play the major role in shaping the world economy in 2024. The elite economists consulted agree shared their views on how each component would contribute towards a slower global economy in 2024.

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Now lets look at how each factor is predicted to play a role in in the world economy this 2024.

• Interest rates to gradually rise - 93% agrees: Interests rates typically affects every part of the economy because individuals and businesses take out loans to finance transactions. The Fed is tasked with managing interest rates for that country. Whatever action they take not only affects the US economy, but also that of the world.

Raising interest rate is supposed to have positive effects in various aspects of the economy. For example, it reduces inflation in the economy and makes people to be more cautious with spending. When things are a little expensive, people spend wisely and avoid flamboyant lifestyles. The reduction in demand for goods also means the lowering of the market cost of such goods. Inflation is thus cut down with higher interest rates.

As seen in the chart above, 93% of the chief economics believe that the interest rates would go up gradually in 2024. The slow speed will definitely mean that the global economy will also grow slowly.

• Geopolitics to weaken economy - 90% agrees: This is evidence already to believe that this could be true. For example, the war between Israel and Militants in the middle East such as Hamas is already affecting global trade. Militants from Yemen are attacking ships passing through the red sea. Such disruptions in global shipping lines is already affecting both the shipping companies, local businesses making the goods, and consumers.

With shipping companies taking a longer route around the tip of Africa, the cost of shipping has gone up. Consumers will pay higher to buy the goods. This a clear example very early in 2024. The war between Russia and Ukraine is another example. Its not surprising to see that 90% of the chief economists believe that geopolitics will lead to global economic uncertainties.

• Global inflation not highest - 86% agrees: Majority of the economists believe that various governments would take action to address inflation. One of the actions could be to raise interest rates. The US which boasts the worlds largest economy could be the leading example here.

So the economists believe that inflation in previous years would be higher than what it will be in 2024. This they think would still be a weak link for the global economic growth.

• Tougher loans for businesses - 85% agree: The chief economics believe that businesses would find it more difficult to access loans in 2024. If this prediction is to come true in 2024, then it will affect the local economies and the global one. It means that businesses will have lesser funds to operate. They will have smaller workforce, layoffs will happen a lot, and other issues. This is why they believe that this economic condition will stifle the growth of world economy.

• Domestic politics would be a problem - 79% agrees: It looks like the chief economists will get this prediction right. So early in 2024, we are already seeing the effect of domestic politics on world economy. Again, the Hezbollah and other militants in the middle East disrupting shipping lines and endangering international maritime safety is already a shining example - a real growing concern for the world economy. These militants are supported by various governments in the places they operate. By forcing ships to take longer routes instead of the shorter red sea route, they have effectively caused the cost of production and purchase to rise.

Other aspects of local politics such as unfavorable government policies for businesses might have a bad effect on the economy. Hence the economists believe that this would be a factor to limit global economy growth in 2024

• Loose market conditions - 68% agrees: This might probably happen as predicted. One of the effects of a loose labor market is higher unemployment rates. In 2024 already, there have been lots of layoffs. Even in the tech sector where experts bank on rare special skills, many have already lost their jobs.

Technological inventions or innovations could be one real concern here. Take for example the emerging AI space. Many people have already lost or going to loose their jobs to AI because of its capabilities. Even in sectors that were previously thought of being safe from the invention, AI is threatening to disrupt job markets there. Higher Unemployment rate is just one situation that exist when the market conditions are loose. There are many more and the economists might be right to believe that these will happen more in 2024 and cause the world economy to grow slowly.

Finally

The above predictions remain - predictions. They are not reality yet. But these predictions were made by elite economists. Impressively, here we are in 2024 already. We will continue to wait and watch to see how each element or other economic factors contribute to the growth or lack of growth of the world economy.

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