Global economic prospects remain tempered and are surrounded by uncertainty, as highlighted in the newest Chief Economists Outlook released today during the start of Davos. The global economy is still contending with challenges stemming from stringent financial conditions, geopolitical tensions, and the swift evolution of generative artificial intelligence (AI).
Over half of the chief economists (56%) surveyed anticipate a weakening of the global economy this year, whereas 43% predict conditions will remain stable or improve. There is a widespread belief that labour markets (77%) and financial conditions (70%) will become more relaxed in the upcoming year.
While high inflation expectations have reduced across all regions, the growth forecasts vary significantly, with no region expected to experience very robust growth in 2024.
Saadia Zahidi, Managing Director at the World Economic Forum, said, “The latest Chief Economists Outlook emphasises the fragile state of the current economic climate. As the world experiences increasing divergence, the resilience of the global economy will face further tests in the coming year. Even though global inflation is subsiding, growth is decelerating, financial conditions are stringent, global tensions are escalating, and inequalities are growing – all of which underline the pressing need for global collaboration to foster sustainable, inclusive economic growth.”
Regional outlooks
The projections for South Asia and East Asia and Pacific are positive and largely similar to the previous survey, with a strong majority (93% and 86%, respectively) expecting at least moderate growth in 2024.
However, China is an outlier, with a smaller majority (69%) predicting moderate growth due to subdued consumption, decreased industrial production, and property market concerns impacting the possibility of a stronger recovery.
In Europe, the outlook has deteriorated since the September 2023 survey, with nearly double the number of respondents (77%) now expecting weak or very weak growth. The outlook is also more pessimistic in the United States and the Middle East and North Africa, with about six out of ten respondents predicting moderate or stronger growth this year (down from 78% and 79% respectively).
Expectations for growth have increased in Latin America and the Caribbean, sub-Saharan Africa, and Central Asia, although the consensus is for generally moderate growth.
Geopolitical tensions and economic uncertainty
Approximately 70% of chief economists anticipate an acceleration in geoeconomic fragmentation this year, with the majority agreeing that geopolitics will fuel volatility in the global economy (87%) and stock markets (80%), foster localisation (86%), strengthen geoeconomic blocs (80%), and exacerbate the North-South divide (57%) over the next three years.
With governments increasingly using industrial policy tools, there is near-unanimity in the expectation that these policies will largely remain uncoordinated internationally.
While two-thirds of chief economists foresee industrial policies aiding the emergence of new economic growth areas and key industries, a majority also express concerns about increasing fiscal pressures (79%) and widening disparities between higher and lower-income economies (66%).
Focus on AI
Chief economists predict that the benefits of AI will differ markedly across income brackets, with more positive expectations in high-income economies. A considerable majority believe generative AI will enhance output production efficiency (79%) and innovation (74%) in high-income economies this year.
Over the next five years, 94% expect these productivity gains to become economically significant in high-income economies, in contrast to just 53% for low-income economies.
Almost three-quarters (73%) do not anticipate a net positive impact on employment in low-income economies, and 47% hold the same view for high-income economies. Opinions are more varied regarding the potential of generative AI to boost living standards and to contribute to a decline in trust, with both outcomes slightly more probable in high-income markets.
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