Chief Economists Foresee Economic Growth amid Rising Political Risks in 2024: World Economic Forum
The World Economic Forum’s latest Chief Economists Outlook casts a cautiously optimistic view for the global economy in 2024, balanced by the weight of significant political risks. The report reveals a sentiment of cautious optimism among chief economists, with 82% anticipating the global economy to strengthen or maintain its current state throughout the year—a sharp rise from the latter half of the previous year.
The consensus towards a downturn has notably reduced, with only 17% of chief economists envisaging a decline in global conditions, a significant drop from 56% earlier in January. Despite this optimistic economic forecast, geopolitical and domestic political tensions are expected to intensify, marking a potential source of volatility. A striking 97% of respondents foresee geopolitical factors influencing global economic fluctuations, while 83% regard domestic politics as a pivotal volatility driver, especially considering the vast number of global electoral processes set to take place.
Saadia Zahidi, a Managing Director at the World Economic Forum, highlights the importance of adaptive policy-making in this context. The aim is not only to rejuvenate the global economy but to establish a groundwork for inclusive, sustainable, and resilient growth amidst this evolving landscape.
The economic growth outlook varies substantially by region. In the United States, an overwhelming majority (97%) of chief economists project moderate to strong growth, marking a significant shift from 59% in January. Asian economies, particularly in South Asia and the East Asia and Pacific regions, are forecasted to experience at least moderate growth, according to all respondents. China’s growth expectations are somewhat less buoyant, with three-quarters projecting moderate growth and a mere 4% anticipating strong growth. Conversely, Europe faces a more challenging forecast, with nearly 70% of economists predicting weak growth for Europe throughout 2024.
Other regions exhibit expectations of moderate growth, indicating slight improvements from previous prognostications. The survey sheds light on the escalating challenges for businesses and policymakers, intertwined with political and economic dynamics. A significant majority (86%) of respondents believe these tensions will challenge decision-makers extensively this year. Furthermore, nearly 79% predict that the increasing complexity will complicate the decision-making process.
Factors influencing corporate decision-making span the global economic health, monetary policy, financial markets, and labor market conditions, with all respondents identifying the state of the global economy as influential. Interestingly, growth objectives are seen as paramount in driving decisions for companies, a sentiment that significantly outweighs the emphasis on environmental and social goals.
Looking forward, optimism remains for sustained global growth, with nearly 70% of chief economists expecting a return to 4% growth within the next five years. Key drivers in high-income countries include technological advancements, artificial intelligence, and transitions towards green energy. Nonetheless, the impact of these factors on low-income economies is subject to greater debate, with geopolitics, domestic politics, debt levels, climate change, and social polarization identified as potential growth impediments universally.
Potential policies to foster growth encompass innovation, infrastructure development, monetary dynamics, and enhancements in education and skills. The emphasis for low-income economies leans more towards improvements in institutions, social services, and access to finance. However, opinions vary regarding the growth impact of environmental and industrial policies, indicating a diverse landscape of perspectives among the global economic community.
