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Global economy will contract further this year, says WEF

More than half of top economists anticipate further weakening of the global economy this year, with subdued and uncertain prospects for the global economy, a new survey by World Economic Forum (WEF) has shown.

Many chief economists in the public and private sectors who participated in the WEF survey expressed concern about growing fiscal pressures (79 percent) and the growing gap between higher- and lower-income economies (66 percent) as uncertainty casts a shadow over the short-term economic outlook.

“Amid accelerating divergence, the resilience of the global economy will continue to be tested in the year ahead,” WEF Managing Director, Saadia Zahidi said in the forum's latest Chief Economists Outlook report yesterday.

“Though global inflation is easing, growth is stalling, financial conditions remain tight, global tensions are deepening and inequalities are rising," the survey stated.

Despite avoiding a recession last year, the global economy is still dealing with challenges from growing geopolitical unrest that could pose "new near-term hazards for it," according to a World Bank report released last week.

According to the Washington-based lender's Global Economic Prospects report, the world economy is expected to develop at its slowest rate in half a decade in 30 years, with the ongoing turmoil in the Middle East being one of the main threats to the forecast.

In 2024, the global gross domestic product is expected to slow down for the third consecutive year, reaching 2.4 percent, which is slower than the majority of industrialised and developing economies saw in the ten years prior to the Covid-19 pandemic.

Regardless, almost 43 percent of senior economists polled by the WEF predicted that, in contrast to last year, the economy would remain mostly stable or even strengthen this year.

Chief economists anticipate that regional variations in the rate of economic growth will persist.

With China being the exception, South and East Asia are still predicted to have the most robust economies. Approximately 70 percent of those polled anticipate relatively moderate growth in the area.

Since the Chief Economists Outlook published in September 2023, the outlook has deteriorated in the US and the Mena region, with over 60 percent of respondents anticipating moderate or greater growth this year.

Meanwhile, 77 percent of Europeans anticipate extremely weak or weak growth in 2024.

The most recent survey is largely concerned with two major events that are impacting the world economy: advances in generative AI and geopolitical changes.

The rate of geo-economic fragmentation is expected to pick up this year, according to about seven out of ten chief economists.

Eighty percent of respondents said it would increase stock market volatility and eighty percent believed it would exacerbate global economic volatility.

"The rapid advances in artificial intelligence pushed it to the top of business and policy agendas in 2024," the survey stated.

In high-income nations, as opposed to developing ones, survey participants are more upbeat about the advantages of AI.

They expect AI to help increase the efficiency of output production (79 per cent) and innovation (74 per cent), with a more mixed picture regarding standards of living (57 per cent).

 “94 percent Chief economists are almost unanimous in expecting productivity gains to become economically significant in high-income economies in the next five years, compared to only 53 per cent for low-income economies,” the survey indicated.