As global leaders convene for their annual gathering, a Monday survey by chief economists projects a global economic decline in 2024 and an acceleration of geo-economic fragmentation. The Chief Economists Outlook report from the World Economic Forum (WEF) warns of increased economic uncertainty, citing ongoing challenges like tight financial conditions, geopolitical tensions, and rapid advances in generative artificial intelligence (AI).
Positive Outlook for Some Regions:
Over half of chief economists (56%) predict a weakened global economy this year, while 43% foresee conditions remaining unchanged or strengthening. Despite this, the outlook for South Asia and East Asia and the Pacific remains positive, with a substantial majority expecting at least moderate growth in 2024.
China's Unique Circumstance:
China stands as an exception, with a smaller majority (69%) anticipating moderate growth due to concerns over weak consumption, lower industrial production, and property market issues hindering a stronger rebound.
Globally, the majority also anticipates loosening labor markets (77%) and financial conditions (70%) in the coming year. While expectations for high inflation have been tempered in all regions, regional growth outlooks vary, with no region projected for very strong growth in 2024.
WEF Managing Director Saadia Zahidi emphasizes the precarious economic environment highlighted by the Chief Economists Outlook. Zahidi underscores the need for global cooperation to foster sustainable, inclusive economic growth amid easing global inflation, stalling growth, tight financial conditions, deepening global tensions, and rising inequalities.
Concerns over Geo-economic Fragmentation:
In Europe, the economic outlook has significantly weakened since September 2023, with 77% of respondents expecting weak or very weak growth. In the US and the Middle East and North Africa (MENA), the outlook is also weaker, with approximately six in 10 respondents foreseeing moderate or stronger growth this year.
Expectations for increased geo-economic fragmentation are shared by around seven in 10 chief economists, who anticipate accelerated fragmentation this year. A majority believes geopolitics will heighten volatility in the global economy (87%) and stock markets (80%), increase localization (86%), strengthen geo-economic blocs (80%), and widen the North-South divide (57%) in the next three years.
As governments experiment with industrial policy tools, chief economists expect these policies to remain largely uncoordinated between countries. While two-thirds expect industrial policies to foster new economic growth hotspots and vital industries, they also warn of rising fiscal strains and divergence between higher- and lower-income economies.
Chief economists anticipate varying AI-enabled benefits across income groups, with more optimistic views in high-income economies. A strong majority believes generative AI will increase efficiency in output production (79%) and innovation (74%) in high-income economies in the current year. Looking ahead five years, 94% expect these productivity benefits to become economically significant in high-income economies, compared to 53% for low-income economies.
Regarding employment impact, almost three-quarters (73%) do not foresee a net positive impact on employment in low-income economies, and 47% say the same for high-income economies. Views are divided on the likelihood of generative AI increasing standards of living and leading to a decline in trust, with both being slightly more likely in high-income markets.
The Chief Economists Outlook draws on the latest policy development research, consultations, and surveys with leading chief economists from the public and private sectors. The survey was conducted in November-December 2023.