“New Year – new challenges” or “New Year – new opportunities?” Which will it be for 2024? With the year just beginning, it’s a good time to reflect, analyse and make some predictions not only for the world economy but also for the international development sector. As there is no sign of the end of the war in Ukraine, and the conflict between Israel and Hamas continues, as the climate continues to change, and many more crises affect various regions of the world, economies are coming under enormous pressure. According to the IMF, global economic growth will slow down to 2.9% in 2024, but this scenario could change due to the constantly shifting situation across the major economic powers. Let’s put this subject on the experts’ plate and see what they think about the economic prospects for 2024.
Key Takeaways:
- The world economy continues to recover from the COVID-19 pandemic, Russia’s invasion of Ukraine, and the 2022 energy crisis, but growth trends are increasingly divergent globally.
- Anticipated disparities in economic performance persist, with the U.S. and Eurozone facing slower growth rates compared to the brisk economic pace of China and India.
- The IMF expects the world economy to grow by 3.1% in 2028, well below the five-year forecast of 4.9% on the eve of the 2008-2009 global financial crisis.
- Inflation continues to decline globally following the reduction in energy prices and, to a lesser extent, food prices.
- Experts predict increased debt vulnerabilities for the world’s poorest countries.
DevelopmentAid: What are your economic predictions for 2024?
“The economic growth globally is predicted to decelerate only slightly from about 3.0% in 2023 to 2.9% in the following year, according to the IMF. This is due to the expected economic slowdown in the advanced world (from 1.5% to 1.4%) while emerging and developing economies are predicted to continue growing at a more significant 4% in 2024. Geographical divergences in economic performances across the globe are expected to continue in 2024. While in the U.S. a soft-landing scenario remains the most probable one and the economy is expected to grow by 1.5% in 2024, the Eurozone economy is likely to grow at a slightly slower 1.2%. China (4.2%) and India (6.3%) are expected to continue growing at a brisk pace and, although their growth will decelerate somewhat, they will provide support for the world economy in 2024. Most of the region of Central and Eastern Europe will see some acceleration in economic growth compared to 2023. Strong disinflation will deliver gains in real wages across countries and a rebound in household consumption should be a central driver of additional growth in the region. Geographical fragmentation is unlikely to revert any time soon. This is due to significant and lasting tensions between two superpowers, the U.S. and China, as well as the continued military conflicts in Ukraine and the Middle East. Global trade, supply-chain reconfigurations, and investment flows are hence likely to be increasingly aligned along geo-political lines.”
“World GDP growth in 2024 is about to slow down as the tighter financial conditions of weak trade and credit continue. The American and Chinese economies are expected to slow, from growth rates of 2.4% and 5.2% in 2023 to 2.1% and 4.7% in 2024. In the Euro area (hit relatively hard by the Ukraine war and the energy price shock), the projected GDP growth of 0.6% in 2023 is expected to rise to 0.9% in 2024.”
“The behavior of interest rates in 2024 will depend on the economic and monetary policies that governments of countries implement to increase production, benefitting from their competitive advantages within the framework of the global context to face the uncertainty generated by the invasion of Ukraine and widening geopolitical rifts. There is now a new uncertainty arising from the war between Israel and Hamas militants. Increasing food production, particularly in the case of Latin America, involves improving its disadvantages in terms of the production of inputs for products such as fertilizers. Directing this process of improvement toward the production of organic fertilizers and inputs that do not affect the productivity of the land in the long term and also decrease the water footprint in their productive processes is essential. Making public spending more efficient so that it contributes to this process, especially in the case of the poorest countries, allowing environmental sustainability to face the challenges of climate change. Directing these policies to the reduction of the carbon footprint to develop vital vertical integration production processes, both current and future, is crucial. Attracting Foreign Direct Investment consistent with these policies is key to achieving a positive socio-economic and environmental impact that will generate a beneficial cycle of sustainable economic growth.”
DevelopmentAid: Will inflation slow down or the opposite? Argue your position.
“The year 2023 has seen substantial disinflation in many parts of the world owing to tight monetary policies dampening aggregate demand conditions and lower commodity prices worldwide. According to the IMF, global inflation has declined to 6.9% in 2023 and is forecast to fall further to 5.8% in 2024, with risks to this prediction significantly skewed on the downside. Interestingly, towards the end of 2023, three EU countries registered negative consumer prices growth and a possibility of more broadly based deflationary trends in the EU should not be entirely excluded. Overall, primary disinflation drivers in 2024 should be lower commodity prices and the lagged effect of tighter monetary policies on aggregate demand across countries.”
“Inflation is expected to ease and to remain in control as long as the labor market continues to improve, with relatively low rates of energy costs and unemployment. There still remains a concern in respect of the Israel-Hamas war. A wider conflict could overrule the current expectations, as this could create significant disruptions to energy markets and major trade routes that will increase financial market risks and further slow growth, adding eventually to inflation.”
DevelopmentAid: What will the world’s poorest countries’ debt look like in 2024?
“The poorest countries’ debt came under strain in 2023 due to sharp interest rate spikes in the developed world. Facing such adverse financial conditions, these countries must pay a substantially increased share of fiscal revenues to service their debts. The increasing debt costs have circumscribed significantly the fiscal space for much-needed investments to accomplish the countries’ development goals and combat the climate crisis. A need to roll over debt at a higher interest level in 2024 compared to levels at which maturing debt was issued years ago will mean that the poorest countries’ debts will likely be under additional pressure in 2024. On a more optimistic note, we expect looser monetary conditions going forward due to decelerating inflation which will lead to lower interest rates in future years.”
“There are growing concerns that, if current trends persist, many of the poorest countries will face high debt vulnerabilities, as their already weak solvency and liquidity indicators will further deteriorate. These countries must reduce today’s debt burdens promptly through economic reform and debt restructuring processes, lowering their costs of financing.”
Gaining some clarity regarding economic forecasts from the experts above, some labor specialists also predict that the job market is steadily returning to its pre-pandemic state. To secure the best assignments in the international development sector, try DevelopmentAid’s advanced filters not only for job opportunities but also to access the open tenders and grants published by donors and development organizations. Upgrade your account to the Professional Plus Membership package and unlock new possibilities for your career in the aid sector.
