The Outlook for the Global Economy in 2024

Expectations of a Global Economic Slowdown

The global economy, which has demonstrated surprising resilience this year, is predicted to weaken in 2024 due to various factors such as wars, high inflation, and sustained high interest rates. According to the Organization for Economic Cooperation and Development (OECD), international growth is projected to slow to 2.7% in 2024, compared to an expected 2.9% pace this year. This would mark the slowest calendar-year growth since the pandemic hit in 2020.

Recessions to be Avoided, but Concerns Remain

While the outlook may be less positive, the OECD emphasized that recessions are expected to be avoided worldwide. However, there are still concerns about persistently high inflation and the impact of conflicts like the Israel-Hamas war and Russia’s war in Ukraine on commodity prices.

Factors Influencing the Slowdown

A significant factor contributing to the projected global slowdown is the expected deceleration of the United States and China, the world’s two largest economies. The US economy is forecasted to expand by only 1.5% in 2024, compared to 2.4% in 2023, mainly due to the Federal Reserve’s ongoing interest rate increases, which have constrained growth. The Chinese economy, grappling with issues like a real estate crisis and rising unemployment, is expected to expand by 4.7% in 2024, down from 5.2% this year.

Influences from Europe

An additional contributing factor to the global slowdown is the impact on the 20 countries within the Eurozone that share the euro currency. These countries have been negatively affected by increased interest rates and rising energy prices following Russia’s invasion of Ukraine. The OECD expects the collective growth of the Eurozone to reach 0.9% next year, representing an improvement over a predicted 0.6% growth in 2023.

Geopolitical Risks and Recent Shocks

The world economy has experienced various shocks since early 2020, including the eruption of the COVID-19 pandemic, unexpected inflation resurgence, the war in Ukraine, and high borrowing rates. Despite these challenges, economic expansion has remained unexpectedly strong. However, the OECD warns that economic growth is now moderating as tighter financial conditions, weak trade growth, and low business and consumer confidence start to take effect. Additionally, heightened geopolitical tensions, particularly resulting from the Israel-Hamas conflict, pose new risks that could disrupt energy markets and major trade routes.

Source: Global economy will sputter in 2024 because of inflation, interest rates and wars, OECD says