The United Nations on Thursday issued a bleak outlook for the global economy in 2024, pointing to challenges including rising conflict, sluggish global trade, high interest rates and increasing climate disasters.
In its flagship economic report, the United Nations projected that global economic growth will slow to 2.4% this year from an estimated 2.7% in 2023, stronger than expected, but both are below the 3% growth rate recorded in 2020 before the coronavirus pandemic began, the UN said.
The UN’s forecast is lower than those given by the International Monetary Fund (IMF) in October and the Organisation for Economic Cooperation and Development (OECD) in late November.
The IMF said it expects global economic growth to slow to 2.9% in 2024 from an expected 3% in 2023. The Paris-based OECD, which comprises 38 mostly developed countries, also forecasts global economic growth to slow to 2.7% in 2024 from an expected 2.9% in 2023.
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The UN report, World Economic Situation and Prospects 2024, warned that the prospect of a prolonged period of tough credit conditions and rising borrowing costs poses “strong headwinds” for a global economy that is burdened with debt, particularly in poor developing countries that need investment to restore growth.
Shantanu Mukherjee, director of the United Nations’ Department of Economic Analysis and Policy, said fears of a recession in 2023 were averted because the world’s largest economy managed to tame high inflation without putting the brakes on its economy.
But at a press conference announcing the report, he said “we’re not out of the danger zone yet.”
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Mukherjee said that global instability could accelerate inflation, and that if there were new shocks to supply chains or problems with fuel supply and distribution, for example, interest rates could be raised again to get the situation under control.
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“We’re not expecting a recession per se, but the volatile environment we’re in poses this as a major source of risk,” he said.
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Mukherjee said very high interest rates for a long period of time and the threat of a price shock led to a “very difficult balancing act.” “That’s why I said we’re not out of the woods yet.”
Global inflation, which stood at 8.1% in 2022, is estimated to fall to 5.7% in 2023 and is forecast to fall further to 3.9% in 2024, according to the report.
But about a quarter of developing countries are expected to see annual inflation exceed 10 percent this year.
The U.S. economy is expected to perform “very strong” in 2023, but growth is expected to slow to 1.4% this year from an estimated 2.5% in 2023, according to the report.
“Falling household savings, high interest rates and a slow labor market recovery are projected to weaken consumer spending and remain sluggish in 2024,” the U.N. said. “While the likelihood of a hard landing has significantly decreased, the U.S. economy faces significant downside risks from deterioration in labor, housing and financial markets.”
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The report said Europe faces a “challenging economic outlook” due to rising inflation and interest rates.
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European Union (EU) GDP is forecast to expand by 0.5% in 2023 to 1.2% in 2024, with the increase driven by “increased consumer spending as price pressures ease, real wages rise and labor markets remain strong.”
Japan, the world’s fourth-largest economy, is expected to see economic growth slow to 1.2 percent this year from 1.7 percent in 2023 despite the country’s monetary and fiscal policies, the report said, adding that “the rise in inflation could mark an end to the deflationary trend that has continued in the country for more than two decades.”
The United Nations said China, the world’s second-largest economy, is recovering more slowly than expected from anti-coronavirus lockdowns amid domestic and international headwinds.
The report said the economy is expected to grow just 3.0% in 2022 before picking up in the second half of 2023, with growth reaching 5.3%. However, a combination of weakness in the real estate sector and sluggish external demand for manufactured goods “will see growth slow modestly to 4.7% in 2024.”
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In the developing region, the UN said it projects Africa’s economic growth to increase slightly from an average of 3.3 percent in 2023 to 3.5 percent in 2024 but remain weak.
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“The ongoing climate crisis and extreme weather events will hit agricultural production and tourism, while geopolitical instability will continue to have adverse effects on several regions, particularly in the Sahel and North Africa,” the report said.
The UN projects that the East Asian economy will slow modestly, from 4.9% in 2023 to 4.6% in 2024. In West Asia, GDP is projected to grow from 1.7% in 2023 to 2.9% in 2024.
In South Asia, GDP grew an estimated 5.3 percent last year and is projected to grow 5.2 percent in 2024, “led by strong growth in India, the world’s fastest-growing large economy.” Growth in India is forecast to reach 6.2 percent this year, with a projected 6.3 percent increase in 2023.
© 2024 The Canadian Press
