EY – Global Economic Outlook, 2024

According to EY's Global Economic Outlook for 2024, the global economy performed better than expected in 2023, with global GDP growth reaching 3.1% and surpassing consensus expectations. This was achieved despite challenges such as tightening monetary policies, banking sector stress, and geopolitical conflicts. The strong global economic performance can be attributed to factors such as growth in the labor market, a shift towards service-driven growth, and healthy household and corporate balance sheets. On the other hand, global inflation declined due to easing supply constraints, reduced labor shortages, cooling energy prices, and moderating demand growth. However, despite the positive economic indicators, consumer and business morale remains low. This can be attributed to factors such as high cost levels, recessionary narratives, and the negative impact of social media amplification. Looking ahead to 2024, EY predicts moderate global GDP growth of around 2.8%, with advanced economies growing at around 1.2% and emerging markets at around 3.8%. The US economy is expected to grow moderately at 1.8%, with Europe growing at 0.8%. Most emerging economies are expected to grow below trend, and China may fall short of its 5% GDP growth target. The report highlights several headwinds and tailwinds for the global economy in 2024. Headwinds include weaker employment growth, elevated prices and wages, high interest rates, tighter credit conditions, and fiscal consolidation. However, there is room for optimism as labor markets could prove more resilient than anticipated, and central banks may cut rates to provide support. Additionally, businesses may focus on productivity growth and investment in cutting-edge technologies. Further disinflation is expected in 2024 due to reduced supply constraints, moderate demand growth, rebalancing labor markets, and cooling rents. Central banks are likely to pivot towards policy easing, but are expected to wait until there is undeniable evidence of sustained inflation before cutting rates. Fiscal consolidation is anticipated in most advanced and emerging economies, driven by a focus on budget deficits and a high interest rate environment. Geopolitical fragmentation is seen as a risk to the global outlook, while a modest recovery in global trade flows is expected, with services outpacing merchandise trade.