Global economy to slow further in 2024 despite pressures easing, analysts say

The global economy slowed but remained resilient, skirting what many feared would be an inflation and commodity price-driven recession this year.

Although growth is estimated to be even slower in 2024, the worst is perhaps over and headwinds are expected to ease, analysts say.

The consistently high interest rates are expected to come down, although inflation, trending down, is still not in the 2 per cent target range of most central banks in the world.

Many analysts expect the next major monetary policy move in 2024 from the US Federal Reserve will be a rate cut, although they remain divided on when the Fed is likely to slash its benchmark rate and by how many basis points the regulator will lower it.

While inflation and rates trending down will bode well for growth in the latter half of next year, risks remain that can hamper economic momentum.

Geopolitical tensions, the health of the US and Chinese economies, volatility in oil prices, widening growth divergence, worryingly high global debt levels, and the mounting cost of climate are among the factors that will determine if the global economy has a soft landing next year.

The entirety of this year was defined by muted growth, dotted with geopolitical shocks and an abrupt banking crisis that threatened to derail growth. The continuation of the sharpest monetary policy tightening in decades to subdue consumer prices also took the wind out of sails.

The International Monetary Fund expects global economic growth at 3 per cent this year, slower than the 3.5 per cent expansion recorded in 2022, remaining below the historical world growth average, the Washington-based fund said in its World Economic Outlook in October.

For next year, the IMF expects global gross domestic product to expand by 2.9 per cent, while the World Bank estimates 2.4 per cent growth and the Organisation of Economic Co-operation and Development forecasts it at 2.7 per cent.

Both the IMF and the World Bank anticipate growth to remain slow and uneven, especially in emerging and developing economies.

“Looking at 2024, we anticipate uncertainty to persist, with sub-trend growth projected across the world’s economies,” State Street Global Advisor said in its 2024 Outlook report.

“While the path to a soft landing appears viable, with growth decelerating but not collapsing, the effects of monetary policy tightening are still working their way through the system.”