Overview of analyst forecasts for global economy in 2024

In this report, Argaam monitored the key takeaways from a number of financial institutions on the performance of global economy in 2023, and their economic and financial expectations for 2024. The forecasts ranged between commending the performance of central banks regarding their monetary policies of interest rate cuts in a hope for returning inflation rates to their target levels, and fears of any recession that might destroy those hopes.

Global economy and inflation

Bank of America said that the year 2023 exceeded all expectations, adding that in 2024 central banks will succeed in achieving a soft landing despite their certainty that risks outweigh the positives. It is also expected that global inflation rates will decline, thus allowing central banks to lower interest rates in the second half of 2024. The Federal Reserve will begin reducing interest rates in June by 25 basis points, according to estimates.

Goldman Sachs also stated that the performance of economic indicators in 2023 was better than expected, adding that the growth rate in 2024 will likely inch lower to 2.4%. Inflation rates are likely to decline as well, the bank said, indicating that the level of risks facing the global economy is higher than usual, with the possibility of a recession occurring in the next 12 months.

However, JPMorgan expects the soft-landing scenario to be achieved in light of robust economic activity and declining inflation rates. However, it believes that the central banks’ announcement of their victory over inflation may be premature, indicating that the fall in interest rates may be delayed, but they may nevertheless decline at rates greater than those expected by the markets. It believes that inflation rates will stabilize after reaching record levels over several decades, as inflation eased in the US and advanced economies and is expected to reach the levels targeted by central banks, which is 2%, by the end of 2024.

AlJazira Capital pointed out that the global economy is forecast to slow down to achieve a soft landing without entering into a recession in 2024. The International Monetary Fund (IMF) expects global GDP growth to slow to 2.9% in 2024, and the US economy to continue to absorb it, thanks to the strong growth in consumption with the cohesion of the labor market. It also expects real income in Europe to decline due to high inflation, and growth in emerging and advanced economies to ease to 4.8% in 2024 due to the slowdown in Chinese recovery.

It also indicated that global inflation is likely to continue to decline to 5.8% in 2024 against the backdrop of rising interest rates and declining supply chain pressures. It expects US interest rates cut by 100 points in 2024. The Saudi Central Bank (SAMA) will follow, lowering the repo rate by 100 points to reach 5%.

Ubhar Capital said that the global stock market witnessed a strong performance in 2023, supported by the performance of developed economies and the US and UK markets. It indicated that this was supported by the strong performance of the US market, with the government avoiding default, corporate profits rising above expected levels, and the strong performance of technology companies, coupled with China lifting COVID-related restrictions.

The robust performance of the global economy eased by the end of the year due to seasonal weakness and some indicators of economic slowdown, which prompted central banks to stop the upward movement in interest rates leading to a strong boost in the performance of the capital markets. Meanwhile, the performance of financial markets in emerging economies was weaker than their counterparts in developed markets, due to the obstacles witnessed in the performance of the Chinese financial market due to the real estate sector crisis and weak fiscal stimulus policies, it added.

Meanwhile, Qatar National Bank (QNB) clarified that the global economy showed more resilience than expected in 2023, identifying three factors that helped the global economy avoid the recession scenario and were the main driver of growth. These include strong consumption drive in the US market—which represents 70% of the US GDP—that benefited from the strength of household financial positions and the fact that households were hedging against high interest rates due to many of them refinancing loans in the wake of the COVID pandemic. The energy crisis in the EU was not as severe as expected given the mild winter, mechanisms for providing alternatives to Russian energy sources, and the accumulation of good stocks since the previous summer. Re-opening the Chinese economy, moving away from restrictive monetary policies, and abandoning some of the restrictions on real estate sector activity, which reflected in the overall growth of the Chinese economy by about 5.2% in 2023.

Deutsche Bank also commented on the expected performance of the global economy, saying that a state of recession in the advanced economies is not expected in 2024, but at the same time it will witness slowdown in the coming quarters, leading to a state of recovery by the end of the year. The bank also expects that the growth rate in the Eurozone and the US will reach nearly 0.7% and 0.8%, respectively, while the Indian economy will likely grow by about 6%, China (5%), and Japan (1%), so that Asia will remain the main driver of global economic growth in 2024.

Research firm Kohlberg Kravis Roberts (KKR) said that it believes that nominal growth in global GDP in 2024 will witness a slowdown. It also expects that commodity price inflation may witness a negative trend, accompanied by a rise in unemployment rates, while interest rates will remain high for some time, which will be a catalyst for fixed income assets in the first half of 2024.

Non-monetary economic policy

Aside from the financial and monetary policies followed by central banks and decision makers in the world’s economies, global geopolitical developments have become a major and influential player in the course of events. BlackRock expects that the pace of evaluating international economic relations will accelerate on the basis of geopolitical developments, so that new blocs of a geopolitical nature will be produced, indicating that the degree of fluctuations at the present time is the highest for decades. The company also highlighted—based on its risk measurement index BGRI—that markets have become more interested than ever in geopolitical developments.