Following years of consternation from events such as the COVID-19 pandemic and the Russia-Ukraine conflict, as well as worldwide inflation, it’s expected that the global economy will continue 2023’s trend of stability and growth this year – albeit at a slower rate in 2024. Multiple economic forecasts highlight a range of positives driving a friendly business environment.
Global Economy 2024 Forecast Highlights
Making up this macro view of the 2024 global economy are several key indicators, as outlined below.
As previously noted, surging inflation has finally cooled, and in many parts of the world, receded to pre-pandemic numbers. The average global inflation rate in 2022 was roughly 6%. Going into this year, it had decreased by half to 3%, likely to drop even further. One report, aptly titled, “The Hard Part is Over,” expects inflation in the U.S. to fall to 2-2.5% by year’s end.
Returning Interest Rate Cuts – To Some Degree
As inflation cools, central banks’ reliance on interest rate hikes is also expected to reverse. While not immediately, many financial analysists predict the first significant interest rate cuts to begin in June, with several others following throughout the rest of 2024. However, borrowers shouldn’t expect this to be a years-long trend where we see rates near 0%, as was seen in the decade following the Great Recession.
Supply Chain Enhancements
Supply chain disruptions impacted virtually every business and household over the past four years. Now that demand has waned and short-term bottleneck issues have been addressed, supply chain companies have begun to implement more macro solutions to boost resiliency ahead of future challenges. Improvements might not be immediately apparent, but they will help limit widespread shortages seen around the world during the pandemic.
Global Issues to Monitor in 2024
The U.S. Presidential Election
Presidential elections drive significant uncertainty among global economists, especially as election day draws nearer. Depending on which candidate wins, the financial market will see starkly different policies and initiatives. According to Reuters, the first quarter of election years traditionally sees an uneven stock market. While it improves in the spring and summer months, the weeks leading up to the election bring heightened volatility. Given the rhetoric and opinions already surrounding the 2024 election, the next 10 months are expected to be particularly heated.
Israel-Hamas War to Drive Energy Prices
The conflict between Israel and Hamas shows no signs of easing in the months ahead. As the situation continues, economists fear the war will drive higher energy prices, specifically oil costs. Should the situation escalate, pulling in neighboring countries, oil prices likely will rise, which subsequently will hinder global manufacturing, trade and hiring needs.
Slowing China Economy
China’s economy has driven so much global economic activity in recent memory, given the nation’s sheer size and influence. But that trend has been slowly reversing the past few years, largely as a result of the pandemic. A combination of residential and commercial property issues also are a major contributor to limited growth, according to many economists.
The global population is aging, fueled by lower fertility rates and increased life expectancies. This will place a strain on social security systems and create a need for new approaches to retirement planning. At the same time, we are seeing a shift in the makeup of the workforce, with Generation Z entering the workforce in larger numbers. These demographic shifts will require global businesses to rethink their approaches to recruitment, retention and benefits.
ESG: Keep the E, Drop S & G
ESG (Environmental, Social and Governance) has been one of the most prevalent business buzzwords the past few years, but divisive opinions around social mandates have many businesses pulling back these efforts. While the whole is met with concern, sustainability remains a safe topic, with many organizations reimagining initiatives to be more “sustainability focused” in both name and function. Looking for ways to reduce things like water consumption and energy use will allow businesses to achieve environmental targets that also improve their bottom line.
Going into 2024, there remain many positive factors driving the global economy, even if they aren’t as pronounced as we saw last year. Monitoring these, and other economic indicators, will help businesses proactively identify and implement changes that support their operational and hiring needs, both in 2024 and the years ahead.