May 30, 2024
QUEZON CITY – The global economy is looking to remain stable—or even strengthen—this year. More than eight in ten chief economists have an increasing sense of “cautious optimism,” according to the May 2024 Chief Economist Outlook by the World Economic Forum (WEF).
Source: Chief Economists Survey, April 2024
Despite this, geopolitical and domestic political tensions loom large. In the survey conducted in April, nearly all (97%) the respondents anticipate that geopolitics will contribute to global economic volatility, while a strong majority (83%) also said domestic politics will be a source of uncertainties this year when nearly half the world’s population is voting.
‘Buoyant’ Asian economies
Here in Asia, chief economists foresee consistent “buoyant” activities, with 100% of respondents expecting moderate or stronger growth in the remainder of 2024.
South Asia has the most optimistic outlook in the region, with a “marked increase” in the share of respondents expecting “strong or very strong growth” this year, up to 70% from 52% in the previous edition.
In East Asia and Pacific, meanwhile, the improvement is “less pronounced,” mostly fueled by an increase in the share of respondents expecting moderate growth.
China is an exception in the region as expectations are slightly less optimistic, with only 4% predicting strong growth this year, as per the report. This outlook is informed by weak consumption and as property market worries dampen near-term prospects.
Representational image of Bangalore, India. The report noted a “marked increase” in the share of respondents expecting strong or very strong growth this year in South Asia, up to 70% from 52% in the previous edition. PHOTO: UNSPLASH
On the other side of the globe, the survey reveals a significant boost in the outlook for the United States, where nearly all chief economists (97%) expect moderate to strong growth this year, up from only 59% in January.
The outlook for Europe, however, is still bleak, with nearly 70% of economists predicting weak growth for the rest of 2024. Other regions are foreseen to experience broadly moderate growth, with a slight improvement since the previous survey.
A challenging global landscape
The broadly optimistic global economic outlook is set against a backdrop of an increasingly complex world. “Deep uncertainty” has characterised, not only the present year, but the world in recent years and, the report says, there appears to be “little prospect of a near-term return to greater predictability.”
Chief economists cite international conflicts, growing social strains, technological shifts and tight financial conditions as all contributory to increased volatility, and will continue to influence the contours of economic activity in “profound” ways.
It goes without saying that this complex global economy makes for a challenging environment for decision-makers, whether in government or in business.
“Some optimism” in sustained global growth
Many of the global developments which have heightened volatility and complexity in this and in recent editions of the Chief Economists Outlook—including “geopolitical rifts and technological transformation”—have profound and far-reaching implications on the global economy.
Expectations of a growth rebound
Source: Chief Economists Survey, April 2024
Taking all of these in consideration, the latest survey results reveal some
optimism among chief economists about the prospects of a sustained rebound in
global growth. Almost seven out of 10 expect global growth to return to 4% within the next five years, while 42% expect it as soon as the next three years.
There are chief economists who are much more pessimistic though (23%), saying global growth will “never return to 4%,” owing to how, historically, higher growth has been an “anomaly rather than the norm.”
Divergences and convergences in views on global trends
When it comes to global trends, respondents view technology as a key positive growth driver, particularly in high-income economies.
Nevertheless, the views are slightly more divided about the impact of technology in low-income economies. The divided views on the growth impact of technology between high-income and low-income economies are “broadly consistent with estimates,” suggesting the level of AI preparedness is almost twice as high in advanced economies compared to low-income economies.
The views on the impacts of green and energy transition on high- and lower-income economies are also divided. This, in part, reflects the challenges when it comes to transitioning faced by lower-income economies, which have lower emissions compared to their high-income counterparts, but face high social and economic costs from the process of global decarbonisation.
On the other hand, there is “much stronger” consensus across high- and
low-income economies when it comes to the impacts of climate change, with the majority of respondents foreseeing a negative impact on growth.
Impact of global trends on growth
Source: Chief Economists Survey, April 2024
Looking at other developments, about two-thirds of respondents expect debt levels,
social polarisation, and domestic political factors to have an adverse impact on growth for high- and low-income economies alike.
Geopolitical factors figure prominently too, with 85% saying they will hamper growth in high-income economies, and 72% for low-income economies. This echoes projections from the International Monetary Fund (IMF) that deepening geopolitical fractures could lead to “worst-case” economic losses equivalent to 7% of the global GDP.
Another area where there is a divergence between chief economists’ expectations for high- and low-income countries is demographic change. About two-thirds of respondents think demographics will have a negative impact on growth in high-income economies, while a majority expect a positive impact in low-income countries. This disparity in expected outcomes reflects the myriad ways in which shifting demographics due to aging, youth populations, and migration trends are developing in different parts of the world.
Industries fueling growth
The sectors anticipated to have the strongest positive effect on the global economy include information technology and digital communications, low-carbon energy (including renewables), and medical, healthcare, and care services. The majority of the respondents also expects leisure and travel as well as engineering and construction to bolster growth.
There was a lack of consensus, however, on the role of other industries, such as mining, supply chain and transport services, manufacturing, fossil-fuel energy and
materials, retail and wholesale of consumer goods, and financial, professional and real estate services.
“The latest Chief Economists Outlook points to welcome but tentative signs of improvement in the global economic climate,” said Saadia Zahidi, managing director of the WEF.
“This underscores the increasingly complex landscape that leaders are navigating. There is an urgent need for policy-making that not only looks to revive the engines of the global economy but also seeks to put in place the foundations of more inclusive, sustainable and resilient growth.”
The full report can be accessed here.