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In 2024, economies and cities across many parts of the world will see a subdued growth environment, with higher-for-longer interest rates and geopolitical uncertainties weighing on consumption, investment, manufacturing and trade. On the upside, easing commodity prices and inflation will give some breathing room for companies and households. While global manufacturing is set to slow down, some markets and sectors could witness growing opportunities, driven by manufacturers’ location diversification efforts.

The economy is ending 2023 in better shape than expected. Most importantly, inflation is falling in much of the world and some central bankers have signaled likely interest rate cuts in 2024. But risks remain as higher interest rates work their way through markets. Geopolitics also looms large. Despite recent tensions in Israel-Palestine, the world economy slowly shed growth at a manageable pace in 2023. The global economy continues to confront the challenges of persistent inflation and subdued growth prospects. GDP growth has been stronger than expected so far in 2023, but is now moderating as the impact of tighter financial conditions, weak trade growth and lower business and consumer confidence is increasingly felt. Financial conditions are restrictive, with forward-looking real interest rates having generally risen further in recent months. Activity has slowed in interest-sensitive sectors, particularly housing markets, and in economies reliant on bank-based finance, especially in Europe. Heightened geopolitical tensions are also again adding to uncertainty about the near-term outlook. Headline inflation has fallen in almost all economies, easing pressures on household incomes, but core inflation remains relatively high.

Global Output

While global GDP growth exceeded expectations thus far, the outlook for 2024 suggests subdued growth due to tightened financial conditions and economic slowdown in major economies. To navigate these challenges, your business needs to build resilience in the face of uncertainty and maintain a growth-oriented approach. The economic outlook remains deeply uncertain. Higher interest rates are grinding their way through the system, wars are wreaking havoc around the world, and climate disasters are becoming more and more common. Five-year growth prospects for the global economy have never been worse.

The macroeconomic situation in 2024 will remain difficult and uncertain — but there are key themes and questions every business leader should keep an eye on heading into next year. While this analysis is focused on the U.S. economy, many of these same questions apply to much of the world.

According to the Organization for Economic Co-operation and Development (OECD), global output, while highly fragmented, will slow in 2024 as high interest rates snuff out persistent inflation and, by extension, economic activity. The Paris-based organization does not anticipate growth to edge up until 2025, at which point leading central banks are expected to aggressively slash borrowing costs. Until then, global gross domestic product (GDP) is forecast to rise by 2.7 percent next year, down slightly from 2.9 percent in 2023. The OECD’s outlook points to a long fiscal hangover from COVID-19, followed by surging energy prices after Russia invaded Ukraine. Moreover, even if monetary policy does begin to unwind next year, global interest rates will remain high by recent historical standards.

Still, economic forecasting is an inexact science. Twelve months ago, predictions of a United States recession were widespread. Elsewhere, market makers were betting that high debt costs would trigger a spate of sovereign defaults across the developing world. Neither have occurred.

Economic Challenges

The global economy continues to confront the challenges of inflation and low growth prospects. GDP growth has been stronger than expected so far in 2023, but is now moderating on the back of tighter financial conditions, weak trade growth and lower business and consumer confidence. Risks to the near-term outlook remain tilted to the downside and include heightened geopolitical tensions, for example due to the evolving conflict following Hamas’ terrorist attacks on Israel; and a larger-than-expected impact of monetary policy tightening. On the upside, growth could also be stronger if households spend more of the excess savings accumulated during the pandemic. Global growth remains highly dependent on fast-growing Asian economies. The sharp initial decline in global consumer price inflation from late 2022 stalled in mid-2023, reflecting a rebound in energy prices and sticky core inflation, particularly for services. The downward trend has resumed and is expected to continue through 2024. S&P Global Market Intelligence analysts forecast annual global consumer price inflation at 4.7% in 2024, down from an estimated 5.6% in 2023 and a peak of 7.6% in 2022. Lower consumer price inflation rates in 2024 compared with 2023 are forecast across most regions. The Projected global GDP growth for 2024 is 2.7%; whereas the projected global GDP growth for 2025 is 3%. Projected OECD headline inflation in 2025 would be 3.8%

While interest rate hikes might have peaked in 2023, borrowing costs are expected to stay elevated throughout 2024, creating a new financial landscape for businesses and consumers alike. The persistence of high interest rates will not only limit access to finance and impede business investment, but also elevate the cost of servicing existing debts. As such, in the coming year, companies must not only priorities the retention and attraction of talent but also focus on improving productivity and implementing cost-effective management strategies to safeguard their financial health. The depreciation will be reinforced by a relative slowing of both US real economic growth and inflation as well as the overhang of a current-account deficit which, as a share of US GDP, is unsustainably high. The yen is expected to appreciate against the US dollar more strongly than many of its peers during 2024, in tandem with the forecast divergence of monetary policy. The global manufacturing sector is forecast to show slower growth of 2.1% in real terms in 2024, down from 2.6% in 2023. Slower global economic growth and consequently stalling demand for B2B goods will drag down the manufacturing sector’s performance. Manufacturers will continue to face labour market problems, potential trade restrictions and stricter environmental regulations that will add to the slower growth.

Inflation is expected to ease

The good news. In the absence of further large shocks to food and energy prices, projected headline inflation is expected to return to levels consistent with central bank targets in most major economies by the end of 2025. Annual OECD headline inflation is expected to fall gradually to 5.2% and 3.8% in 2024 and 2025 respectively, from 7.0% in 2023.

A growing divergence across economies is expected to persist in the near term, with growth in the emerging-market economies generally holding up better than in the advanced economies, and growth in Europe being relatively subdued compared to that in North America and the major Asian economies. Annual consumer price inflation in the G20 economies is projected to continue easing gradually as cost pressures moderate, declining to 5.8% and 3.8% in 2024 and 2025 respectively, from 6.2% in 2023. By 2025, inflation is projected to be back on target in most major economies.

Weak Trade growth

Global trade growth has been surprisingly weak over the past year. This is worrying given the importance of trade for productivity and development. Merchandise trade volumes fell by 1.5% in the first half of the year, whilst services trade volumes are estimated to have risen by 6.4%, as the ongoing normalization of travel in Asia helped to boost tourism. Weak trade is not an entirely new development. Since the recovery from the pandemic, trade has fallen relative to GDP, particularly merchandise trade.

Global Financial Conditions 2024

Financial conditions have tightened in most major economies, reflecting the cumulative effects of past policy rate increases and quantitative tightening, reassessment by market participants of the expected future path of policy rates, and some re-pricing of risk amidst rising geopolitical tensions. Nonetheless, indicators of systemic financial stress generally remain contained, and there are some signs that risk appetite has begun to revive recently as disinflation continues. Forward-looking real interest rates are positive in most major economies. Japan being an exception, with nominal long-term government bond yields also rising substantially in recent months in most advanced economies. In the United States, both real and nominal long-term rates are now around the levels observed prior to the global financial crisis. An upward shift in market expectations of the future policy interest rate path has contributed to the rise in long-term rates, but term premia have also increased in many advanced economies. Longer-term interest rates and government bond spreads have also risen in most emerging-market economies. However, nominal sovereign bond yields have declined in Brazil, with falling inflation allowing the central bank to begin reducing the policy rate, though real longer-term rates remain high.

The rise in policy interest rates is being transmitted swiftly into bank lending rates to firms and households. Bank lending standards have tightened in the euro area and the United States. The growth of credit to both households and firms has also slowed sharply, reflecting a combination of tighter credit supply and falling credit demand. In the euro area and in the United Kingdom, the slowdown in credit demand has been relatively important, whereas weaker credit supply has mattered more in the United States, as reflected in the significant tightening of credit standards for companies.

Future Projection for 2024

A mild slowdown is projected, with a continued moderation of inflation. The broad picture for the world economy over the next two years is one of a moderate slowdown followed by eventual normalization, with growth returning to near-trend rates, and inflation converging back to central bank targets by 2025. Global GDP growth is projected to remain subdued through the first half of 2024, with only a modest improvement thereafter. The tightening of monetary policy since early 2022 is increasingly visible, with forward-looking real interest rates still rising in many economies, slowing domestic demand growth. Fiscal policy is also expected to remain mildly restrictive in most countries, particularly in 2024, with remaining energy support measures being phased out. Labour market prospects are a relative bright spot, with OECD-wide unemployment projected to remain at a low level. Real wages are projected to recover as inflation eases, with part of the increase in labour costs being absorbed by a decline in profit shares in many countries.

Global growth in 2023 is projected to be 2.9%, and weaken to 2.7% in 2024, the lowest annual rate since the global financial crisis other than the first year of the pandemic. As inflation abates further and real incomes strengthen, the world economy is projected to grow by 3.0% in 2025. These outcomes remain highly dependent on the fast-growing Asian economies.

After a relatively strong start to 2023, quarterly global growth is expected to have slowed gradually to an annualized Business investment is projected to stagnate in the near term in many countries before picking up.

The author, Mr. Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger and motivational speaker. He writes articles on diversified topics. Mr. Shaikh can be contacted at