More than half of chief economists (56 per cent) surveyed by the World Economic Forum expected the global economy to weaken this year, while 43 per cent foresee unchanged or stronger conditions.
The outlook for South Asia and East Asia and Pacific, however, remained positive with a strong majority expecting at least moderate growth in 2024.
Warning of more economic uncertainty on the horizon, the Chief Economists Outlook report of the World Economic Forum (WEF) said the global economic prospects remain ‘subdued.’
The Chief Economists Outlook builds on the latest policy development research as well as consultations and surveys with leading chief economists from both the public and private sectors, organized by the WEF’s Centre for the New Economy and Society. The latest survey was conducted in November-December 2023.
The 2023 edition of the annual report of the WEF has focused on the multiple challenges the world is facing today, including wars and the ongoing struggles with living expenses and the escalating effects of climate change.
China and India emerged as exceptions, with a smaller majority (69 per cent) expecting moderate growth in the former, as weak consumption, lower industrial production and property market concerns weigh on the prospects of a stronger rebound.
India is currently seeing ‘exponential growth’and can end up a ’10 trillion US dollar economy maybe in a decade,’ Borge Brende, the President of the World Economic Forum told NDTV in an exclusive interview.
Mr Brende likened the India growth story to a snowball, which ‘grows bigger and bigger’ once it is given a push.
‘We expect things will continue with reforms, there is also peace, no conflict, there is transparency, fight against red tape, investment, R&D, and infrastructure,’ he added.
Asked what could be the key drivers for Indian growth in the days to come, Mr Brende said what is working for India now is that it is ‘positioned in areas where the demand grows faster than in other areas…’
India will look to capitalize on that and is ‘incredibly successful economy for the time being,’ though it has to continue with reforms, Mr Brende pointed out, since there is ‘no such thing as free lunch.’
Drawing the contrast with the Chinese economy, which is entirely based on manufacturing, Brende said India needs to intensify its focus on its services industry, digital trade and e-commerce.
While digital trade is only 15 per cent of the global economy, it grows twice as fast as any other trade area, he said.
Asked whether the border tension with China is a concern, Brende said everyone is watching it ‘very closely,’ but does not think there is any interest in the Indian or Chinese side to escalate it because that would be ‘very unfortunate.’
Globally, a strong majority also said labour markets (77 per cent) and financial conditions (70 per cent) will loosen over the coming year. Although expectations for high inflation have been pared back in all regions, regional growth outlooks vary widely and no region is slated for very strong growth in 2024.
‘The latest Chief Economists Outlook highlights the precarious nature of the current economic environment,’ WEF Managing Director Saadia Zahidi said.
‘Amid accelerating divergence, the resilience of the global economy will continue to be tested in the year ahead.
Though global inflation is easing, growth is stalling, financial conditions remain tight, global tensions are deepening and inequalities are rising, highlighting the urgent need for global cooperation to build momentum for sustainable, inclusive economic growth,’ she added.
In Europe, the outlook has weakened significantly since the September 2023 survey, with the share of respondents expecting weak or very weak growth almost doubling to 77 per cent.
In the US and the Middle East and North Africa (MENA), the outlook is weaker too, with about six in 10 respondents foreseeing moderate or stronger growth this year (down from 78 per cent and 79 per cent, respectively).
There was a notable uptick in growth expectations for Latin America and the Caribbean, sub-Saharan Africa and Central Asia, although the views remain for broadly moderate growth.
About seven in ten chief economists expect the pace of geo-economic fragmentation to accelerate this year, with a majority saying geopolitics will stoke volatility in the global economy (87 per cent) and stock markets (80 per cent), increase localization (86 per cent), strengthen geo-economic blocs (80 per cent) and widen the North-South divide (57 per cent) in the next three years.
Experts are nearly unanimous in expecting the industrial policies to remain largely uncoordinated between countries.
While two-thirds of chief economists expect industrial policies to enable the emergence of new economic growth hotspots and vital new industries, a majority also warn of rising fiscal strains and divergence between higher- and lower-income economies.
Chief economists expect AI-enabled benefits to vary widely across income groups, with notably more optimistic views about the effects in high-income economies.
A strong majority said generative AI will increase efficiency of output production (79 per cent) and innovation (74 per cent) in high-income economies this year.
Looking at the next five years, 94 per cent expect these productivity benefits to become economically significant in high-income economies, compared to only 53 per cent for low-income economies.
Almost three-quarters (73 per cent) do not foresee net-positive impact on employment in low-income economies and 47 per cent said the same for high-income economies.
The views are somewhat more divided on the likelihood of generative AI to increase standards of living and to lead to a decline in trust, with both being slightly more likely in high-income markets.
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