Low demand, China and geopolitics weaken global GDP

The world faces a weak economy in 2024. The shadows of a potential recession are fading, while concerns are growing about falling demand, exports and the deflationary trend that the Chinese economy has entered. Geopolitical issues and domestic politics are also elements that will generate economic instability in the coming year.

According to the World Economic Forum's latest Leading Economists Outlook report, the word that will define the global economy in 2024 will be “volatility.” However, economists say it is likely to happen More positive changes, such as lower inflation and slowing interest rate increases. Thus, the growth of the major economies that contribute the most to global GDP (G20) is around 2.2% according to the Bloomberg consensus.

In general, most economists agree that rising inflation will end within one year. At the same time, they believe that monetary policy will slow in terms Interest rate increases. But they noted in the forum report that “the atmosphere remains very cautious.”
The economic slowdown in China is one of the main factors for the fluctuations that experts are talking about. The consensus of economists at Bloomberg and the Chinese government itself expects that the Asian giant's GDP will expand by 4.5% in 2024.

But the problem is that China's inflation rate in November of this year closed at negative -0.5%. The consensus expects it to rebound to 1.4% next year. But specifically It's the decline in demand that also worries economists Next year. Global trade is scheduled to end the year 2023 with negative numbers, with a decline of about 0.6%, and will begin to recover in 2024 at a rate of 3.3%.

The World Economic Forum report highlights that in addition to a slower-than-expected recovery in China in early 2023, the Asian giant's prospects are murky. Because of this deflationary spiral The real estate market is showing signs of great fragility. The experts consulted by the forum explained that “trade volumes also declined, with imports falling by 12.4% and exports by 14.5% in the year ending in July 2023.”

Overall, the IMF does not expect a “general deflationary trend” in China. Therefore, the core inflation rate is not expected to rise to 2.1% at the end of 2024, from 0.8% currently.
But the slowdown in China will have a strong negative impact on emerging economies, whose growth will decline to about 3% to 4%.

In the case of the United States, the economic outlook has improved significantly. 80% of experts confirm that the country will witness “strong or moderate growth this year and next.” In fact, Bloomberg's team of experts sees the country ending 2024 with 1.2% growth and remaining sustainable in 2025, which they expect to close at 1.2%. Although it is still lower than previous expectations.

In Europe, the feeling is more or less the same. The Old Continent has been facing “weak or very weak” growth over the past year. But in 2024 things will change, as only 41% of experts expect this weakness in growth. specific, The consensus sees the twenty-seventh year ending with a 1% GDP expansion, The burden is mainly borne by Germany or France, as their growth is still lower than what we should expect from these two powers that support the European economy. Both offer GDP growth forecasts of 0.3% and 0.8%, respectively.

For their part, Schultz's economic advisers, known as the “Five Wise Men,” have cut growth forecasts, with GDP falling by 0.4% this year and expanding by 0.7% by 2024. At the same time, trade tensions call for an escalation. Questioning its export-oriented business model. In fact, they asserted in a report by Allianz Trade that falling demand and rising costs will “inevitably” cause companies to reduce their profit margins.

They say this means there is an increase in corporate bankruptcies, “particularly in Western Europe”. Countries around the world have to confront industrial policies that constitute a real geopolitical battleground. Subsidies challenge global trade and generate enormous tensions between the allied blocs. Just as happened with US policies.