The global economy has been in the spotlight for some time. Despite the worrying trends that emerged in 2023, especially global inflation, the labor market has not taken a major hit, and there are still no signs of a financial catastrophe in the near future. But while this may seem like a temporary win, it's important to note that the global economy remains fragile in 2024 as well.
The latest report from the World Bank shows that although we're nearing the midpoint of what was supposed to be a transformative decade for development, the global economy is on track to post an unwelcome record: the slowest half-decade of GDP growth in the past 30 years.
At first glance, the global economy looks better positioned than it did at this time last year, but rising geopolitical tensions could create new economic problems. The slowdown across most major economies has clearly darkened the outlook for developing economies too.
“Global trade growth in 2024 is projected to be only half the average recorded in the decade before the pandemic”, the World Bank report states.
In addition, “global economic growth is projected to slow for the third consecutive year, from 2.6% last year to 2.4% in 2024, nearly three-quarters of a percentage point below the 2010s average. In addition, developing economies will grow by just 3.9%. After a disappointing performance last year, low-income countries are expected to post 5.5% growth, a weaker result than projected last year. In advanced economies, growth will slow to 1.2% this year, from 1.5% in 2023”.
Some economists say the global economy is still shaky and will remain even more vulnerable this year. A World Economic Forum analysis summarizing the views of leading economists shows that a small group of experts still expects stabilization and even an improvement in the economic outlook.
Still, “without a major course correction from the path we are already on, the 2020s will go down in history as a decade of missed opportunities”, said Indermit Gill, chief economist and senior vice president of the World Bank Group.
Experts say investment booms can play an extremely important role in transforming developing economies. But, “to trigger such booms, developing economies must implement comprehensive policy packages to improve fiscal and monetary frameworks, expand financial flows, and improve the investment climate”, said Ayhan Kose, deputy chief economist at the World Bank.
The impact of artificial intelligence
“The accessibility and versatility of artificial intelligence suggest a massive impact across all sectors of the economy”, said Christian Keller, head of economic research at Barclays.
In 2024, economists expect generative artificial intelligence to change the rules of the game and drive major changes:
- 79% expect higher efficiency
- 74% expect faster innovation
- 57% point to higher living standards
- 23% highlight the decoupling of productivity from wages
- 56% expect a decline in trust
- 23% believe artificial intelligence will have a positive impact on the labor market
As the World Economic Forum points out, many experts believe a new growth model is needed, one that balances growth and productivity with the complexity of innovation, inclusion, sustainability, and resilience.
There are still many unanswered questions around inflation and the labor market in 2024, and politics will remain a major source of economic uncertainty this year, including through the U.S. presidential election, which could have unpredictable consequences for geopolitics, trade, and the wars in Ukraine and the Middle East, according to an analysis by Harvard Business Review.
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