2024: Not much optimism for the global economy

The year 2023 is about to pass with negative results of the global economy. In that context, many economic experts have made comments about the world economy in 2024.

Interest rate cut

The Anadolu Agency (Türkiye) quoted expert Ken Wattret, Vice President of Global Economics at S&P Global Market Intelligence Company (USA), as saying that central banks are expected to start cutting policy interest rates from mid-2024. However, this cut is unlikely to be as strong as the interest rate hikes made in recent months.

Last week, the US Federal Reserve (FED) kept its policy rate unchanged at 5.25%-5.5%, the highest level in the past 22 years. The Bank of England also kept its interest rate at 5.25%, while the European Central Bank kept its main refinancing operations, marginal lending facility and deposit facility at 4.5%, 4.75% and 4% respectively. Recent statistics show that the inflation trend is falling rapidly, with the eurozone at 2.4%, the US at 3.1% and the UK at 4.6%. Central banks, mainly in major economies, have said that interest rates will remain high for a longer period to bring inflation back to the 2% target.

High inflation makes people's lives difficult

The decision by central banks on when and how fast to cut interest rates will be one of the main drivers of the global economy next year, according to Ahmet Ihsan Kaya, chief economist at the UK's National Institute of Economic and Social Research. Kaya said policy rate cuts will be gradual because core inflation remains too high for the target. However, Antonio Afonso, professor of economics at the Lisbon School of Economics and Management (Portugal), is skeptical about central banks keeping interest rates high for a long time, especially when the US is about to hold a presidential election in 2024.

Asia-Pacific: Drivers of Growth

"It would be too optimistic to expect positive global economic growth in 2024. However, we hope that some of the headwinds will ease and that the economic outlook will improve by the end of 2024," Wattret said. According to S&P Global Market Intelligence's forecast, global economic growth in 2024 will be 2.3%, lower than the estimated 2.7% for 2023. Meanwhile, the figure given by Fitch Ratings is only 2.1% in 2024 compared to the revised forecast of 2.9% for 2023.

"The lagged effects of monetary tightening will weigh on US growth next year as credit slows, investment weakens and household income and earnings growth slows. Real interest rates will also rise as the Fed slows to cut rates while inflation picks up again," said Brian Coulton, chief economist at Fitch Ratings. The US economy is expected to slow in the coming period, as has been seen in many other regions, including Europe. Most countries in Western Europe have already fallen into recession, Coulton said. Fitch Ratings' chief economist expects the eurozone to "recover slightly" in 2024.

According to economists, the Asia-Pacific region will continue to be the main driver of global growth in 2024, and there will be important differences within the region, especially with the slowing growth rate of the Chinese economy. According to Fitch Ratings' forecast, China's GDP will be at 4.5% in 2024. "However, with the current real estate crisis in China, there will be risks to the country's economic growth rate," Mr. Coulton commented.

Meanwhile, Mr. Kaya noted that emerging markets are performing better than developed economies, but some countries are seeing slower growth. According to Mr. Kaya, the medium- to long-term risk for Asian countries is an economic slowdown in China due to close trade ties.

MINH CHAU

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