Global economy will continue to slow in 2024, but the worst is over, investors say

The global economy will continue to slow down next year, weighed by persistently high inflation, although the worst of the economic woes faced by the investment community this year are over, asset managers say.

Interest rates are set to start declining in 2024, which will drive growth momentum and give investors renewed confidence to start providing capital, hedge fund managers and investors told Abu Dhabi Finance Week.

But the continued accumulation of global debt, along with a rise in geopolitical uncertainty, are factors that need to be monitored closely, they said at the event, hosted by the Abu Dhabi Global Market.

“We are optimistic for 2024,” Mohammed Alardhi, executive chairman of Bahrain-based Investcorp, told delegates on Tuesday.

“I think it’s the year where we will see the interest rate coming down, we will see inflation starting to get in control. It’s a year we think when investors will start having confidence in deploying their money, [as] we have [already] seen the worst of the financial and the economic challenges.”

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 growth average, the Washington-based fund said in its latest World Economic Outlook in October.

For next year, the IMF expects the global gross domestic product to expand by 2.9 per cent, a 0.1 percentage point downgrade from the fund’s forecast in July. It said the growth would remain slow and uneven, especially in the emerging and developing economies.

Higher interest rates and persistently high inflation have hit global growth momentum.

The US Federal Reserve hit a pause on interest rate increases this month, after raising rates 11 times since March last year to stem inflation that hit a four-decade high in June 2022.

Interest rates are now at 5.4 per cent, a 22-year high, up from close to zero in March last year.

It is the second time the US central bank has left the rates unchanged at between 5.25 per cent and 5.50 per cent as inflation continues to fall in the world’s largest economy.

“Economic activity expanded at a strong pace in the third quarter,” the US central bank said in a policy statement this month. It also said job gains were still strong.