Global Economic Growth Anticipated to Decline Amid Escalating Geopolitical Tensions
In the face of growing geopolitical tensions, leading economists anticipate a downturn in global economic growth this year. This is according to a majority of economists surveyed by the World Economic Forum (WEF) who believe that international geopolitical fragmentation will intensify.
The WEF report released on Monday highlighted, “The global economic landscape remains fraught with uncertainty and subdued prospects.”
Despite positive strides such as easing inflationary pressures and advancements in artificial intelligence (AI), the global economic activity continues to be sluggish. The report pointed out that businesses and policy-makers are grappling with persistent challenges and ongoing volatility due to tightening financial conditions and escalating geopolitical and social tensions.
A survey conducted between November and December of the previous year involving 30 chief economists revealed that over half (56%) predict a weakening in the global economy in 2024. Only 20% foresee an unchanged economic condition and a mere 23% project a “somewhat stronger” economic scenario.
The International Monetary Fund also anticipates a slight dip in global economic growth to 2.9% in 2024, down from 3% the previous year. The survey also highlighted a significant divergence in economists’ expectations for different economies, with the most pessimistic outlook for Europe. A staggering 77% of those surveyed expect a weaker growth in the region this year, nearly double the figure recorded in the September survey.
The economists’ optimism regarding the U.S.’s economic outlook has also dwindled. In contrast to the previous survey where 78% anticipated moderate or higher growth, the latest findings report a drop to 56%.
While the economic outlook for South Asia, East Asia, and the Pacific remained largely positive and unchanged, economists expressed growing concern over China. The majority (69%) now anticipate only moderate economic growth. Geopolitical tensions pose a significant concern, with 69% of economists expecting an acceleration in geopolitical fragmentation this year.
The report stated, “Chief economists continue to assign a significant role to geopolitical factors across macroeconomic and financial developments.”
Approximately 87% predict that recent geopolitical events will induce global economic volatility over the next three years, with eight out of ten anticipating increased volatility in stock markets.
This comes on the heels of a year marked by escalating geopolitical conflicts, including Russia’s ongoing war in Ukraine, strained relations between China and the U.S., and fears of a wider conflict in the Middle East due to the Israel-Hamas war.
Inflation expectations were a silver lining in the WEF’s survey, with 70% of respondents predicting a loosening of financial conditions. Expectations of high inflation dipped across all regions, with notable improvements seen in Europe and the U.S., although two-thirds of those surveyed still anticipate moderate inflation in both regions.
