World’s GDP growth to stay low in 2024 at 2.6pc

ISLAMABAD: The world may not witness reasonable GDP growth in 2024; rather, it will continue to experience lower growth at 2.6-2.9 percent amid challenges of high interest rates and elevated energy prices, along with the possibility of a mild recession in Europe and the UK.

In the case of Pakistan, the IMF projected growth at 2.5 percent, the ADB forecasted at 1.9 percent, and the World Bank projected it at 1.7 percent in FY24.

More importantly, geopolitical risk and ongoing wars in Ukraine and Gaza will also help deteriorate the global GDP growth outlook in 2024, as per the forecasts of major global banks.

Goldman Sachs has projected that world growth will stay at 2.60 percent in 2024, with US GDP growth at 2.1 percent, China at 4.8 percent, the Euro Area at 0.9 percent, the UK at 0.6 percent, and India at 6.3 percent.

Morgan Stanley has projected global growth at 2.80 percent, with US growth at 1.9 percent, China at 4.2 percent, the EU at 0.5 percent, the UK at 0.1 percent, and India at 6.4 percent. Likewise, UBS Global Wealth Management, Barclay, J.P. Morgan, BofA Global Research, and Deutsche Bank also came up with lower growth projections for the said countries. However, Citi Bank has worked out global GDP at 1.9 percent based on the GDP of the US, which has been projected at just 1.1 percent, China at 4.6 percent, the EU at negative 0.20 percent, the UK at negative 0.30 percent, and India at 5.7 percent.

S&P Global Market Intelligence analysts forecast annual global consumer price inflation at 4.7% in 2024, down from an estimated 5.6% in 2023 and a peak of 7.6% in 2022. Lower consumer price inflation rates in 2024 compared with 2023 are forecast across most regions.

“The sharp initial decline in global consumer price inflation from late 2022 stalled in mid-2023, reflecting a rebound in energy prices and sticky core inflation, particularly for services. The downward trend has resumed and is expected to continue through 2024.” Mentioning the expected behaviour of the US dollar in 2024, S&P Global Market Intelligence projected the US dollar depreciation will be reinforced by a relative slowing of both real economic growth and inflation, as well as the overhang of a current-account deficit, which, as a share of US GDP, is unsustainably high. The yen is expected to appreciate against the US dollar more strongly than many of its peers during 2024, in tandem with the forecast divergence of monetary policy.

Allianz Research says that the year 2024 is set to be one of significant political upheaval and economic instability. As countries representing 60% of the global GDP head to the polls, governments, businesses, and households are adopting a widespread ‘wait-and-see’ attitude that will likely delay critical economic decisions.

This heightened uncertainty seems acute in nations like China, Germany, and the United Kingdom. In their newly published Economic Outlook 2023-25, Allianz Research warns that such uncertainty could act as a negative supply shock, potentially raising prices and curtailing output, investment, and consumption.

The Chinese economy was expected to recover quickly in 2023 and resume its role as the undisputed engine of global growth. Instead, it stalled to the point where it’s being called a “drag” on world output by the International Monetary Fund (IMF), among others.Despite its many problems—a property crisis, weak spending, and high youth unemployment—most economists think the world’s second-largest economy will hit its official growth target of around 5% this year.

“The 2024 challenge for the Chinese economy will not be GDP growth—that will likely be above 4.5%,” said Derek Scissors, a senior fellow at the American Enterprise Institute, a centre-right think tank. “The challenge will be that the only direction from there is down.”

In regards to the US economic outlook, the Harvard Business Review says that the US has avoided a recession. And yet, the economic outlook remains deeply uncertain, higher interest rates are grinding their way through the system, wars are wreaking havoc around the world, and climate disasters are becoming more and more common. Five-year growth prospects for the global economy have never been worse.

S&P Global Market Intelligence forecasts weaker annual real GDP growth rates across all the largest regions in 2024 compared with 2023.