Most economists expect the global economy to weaken in the coming year amid political and financial volatility, but a large majority of over 90 per cent are confident of moderate or strong growth in South Asia, notably India, a survey showed on Friday.
Photograph: Anushree Fadnavis/Reuters
At the same time, the outlook for China has dimmed following signs of deflationary pressures and fragility in the country’s real estate market, the World Economic Forum’s latest ‘Chief Economists Outlook’ report said.
As the world grapples with political and financial volatility, almost six in 10 believe the global economic outlook will undermine progress towards meeting the UN Sustainable Development Goals (SDGs), with 74 per cent saying geopolitical tensions will have the same effect.
As world leaders head to New York for the UN high-level week to discuss how to advance on the SDGs, the WEF report found that over 60 per cent of chief economists expect the global economy to weaken in the coming year amid uncertain domestic and international politics and unsettled financial markets.
Although a large majority (86 per cent) expects the recent global inflationary surge to ease, the prolonged tightening of financial conditions is expected to have lasting impacts, including a squeeze on business lending, increases in corporate debt defaults, and potential corrections in property and equity markets.
Developing countries face the most acute effects of these global headwinds, with chief economists warning that progress towards global development goals could be undermined by geopolitical tensions (74 per cent) and tighter financial conditions (59 per cent), the WEF said.
“This is particularly concerning with slowing progress in many areas of the SDGs, including food security, climate action and biodiversity protection.
“At the current pace, more than half a billion people will still live in extreme poverty in 2030,” it added.
A minority of chief economists expect increased cooperation (41 per cent) and private capital flows (30 per cent) between advanced and developing countries over the next three years.
However, if flows of private capital can be unlocked, the economists are particularly optimistic about the potential positive impact on specific areas of development: digital transformation (97 per cent), energy access and affordability (76 per cent), food systems and nutrition (67 per cent), and climate change, biodiversity loss and pollution (67 per cent).
“The latest Chief Economists Outlook points to continuing weakness in the global economy,” WEF managing director Saadia Zahidi said.
“It also highlights the urgent challenges and trade-offs being faced by developing countries, and the need for innovation, cross-border investment and technology transfer to make growth, climate action and human development compatible,” she added.
The economic outlook varies across regions for 2023-2024.
“While the chief economists are most optimistic about growth in Asia, the outlook for China has dimmed since the (last) May 2023 survey, following signs of deflationary pressures and fragility in the country’s real estate market.
“Over 90 per cent expect moderate or strong growth this year in South Asia, notably India, with a clear increase since the last survey in the share of respondents expecting strong growth in the region, from 36 per cent to 52 per cent,” the WEF said.
In the US, the outlook has strengthened since May, with eight in 10 respondents now expecting moderate or strong growth in both 2023 and 2024.
In Europe, 77 per cent expect weak or very weak growth this year, but there is growing optimism about 2024, with expectations of moderate or strong growth jumping from 23 per cent to 60 per cent.
The Chief Economist Outlook builds on the latest policy development research as well as consultations and surveys with leading chief economists from the public and private sectors, organized by the WEF’s Centre for the New Economy and Society.