The latest Chief Economists Outlook released by the World Economic Forum (WEF) in May 2024 reveals a significant shift in economic sentiment, marked by a notable decrease in pessimism regarding global economic conditions. Only 17% of surveyed chief economists now expect a weakening in global conditions this year, a sharp drop from 56% in January.
Despite this growing optimism, the report highlights persistent uncertainties. Respondents nearly unanimously agreed (97%) that geopolitical tensions will drive global economic volatility for the remainder of 2024. This consensus is echoed by concerns over domestic political instability, anticipated by 83% of chief economists, as nearly half of the world’s population prepares for elections this year.
Technological advances, particularly in artificial intelligence (AI), are viewed with less trepidation in the short term. Over two-thirds of chief economists do not believe AI will introduce significant volatility in 2024, reflecting a more measured outlook on technological disruption.
Regional growth projections
Regionally, the survey reveals a nuanced growth outlook. The United States stands out with a marked improvement in growth expectations: 97% of respondents foresee moderate or stronger growth in 2024, up from 59% in January. This buoyancy extends to Asia, where every respondent anticipates at least moderate growth in South Asia, East Asia, and the Pacific regions. However, China presents a more tempered outlook, with three-quarters expecting moderate growth, an increase from 69% at the beginning of the year.
Europe’s economic prospects remain unchanged, with nearly 70% of respondents predicting weak growth. Other regions are projected to experience broadly moderate growth, reflecting a slight uptick in expectations since the previous survey.
Inflation expectations are converging towards a moderate outlook across most regions. This optimism is partly driven by improvements in global supply chains, although expectations for a loosening labour market have diminished since January. Monetary policy is expected to diverge regionally, indicating easing in some areas. Conversely, the fiscal stance is expected to remain unchanged in most regions.
Business challenges
The report highlights the escalating challenges faced by businesses and policymakers. A substantial 79% of chief economists cite heightened complexity as a significant challenge, while 86% point to the tensions between political and economic dynamics as a critical issue. Core economic factors dominate corporate decision-making, with the health of the global economy, monetary policy, financial markets and labour market conditions cited as primary considerations.
Geopolitical and domestic political factors are also influential, with 86% and 71% of respondents identifying them as key drivers. Notably, corporate growth targets are prioritised over environmental and social targets, with 73% versus 37% citing these factors as pivotal in decision-making.
Long-term growth prospects
Looking ahead, the outlook is more optimistic, with nearly 70% of respondents expecting global growth to return to 4% within the next five years, including 42% anticipating this within three years. Technological transformation, AI and green and energy transitions are expected to be significant growth drivers in high-income economies. However, the impact on low-income economies is viewed with more caution.
Challenges such as geopolitics, domestic politics, debt levels, climate change, and social polarisation are expected to affect growth in both high- and low-income economies negatively. Effective policies for boosting growth over the next five years include innovation, infrastructure development, education, skills improvement, and looser monetary policy.
The survey also indicates differing views on the effectiveness of policies like social services and access to finance, which are seen as more beneficial for low-income economies. There is a notable lack of consensus on the impact of environmental and industrial policies on growth, highlighting the complexity of navigating future economic landscapes.
