Don’t Count on a Soft Landing for the Global Economy
Despite analysts’ increasingly optimistic forecasts for the coming year, the risks to global growth are still tilted to the downside. In fact, recent developments in China, Europe, and the United States suggest that the world economy’s biggest challenges may lie ahead.
CAMBRIDGE – A month into 2024, the consensus forecast for the global economy remains cautiously optimistic, with most central banks and analysts projecting either a soft landing or potentially no landing at all. Even my colleague Nouriel Roubini, famous for his bearish tilt, regards the worst-case scenarios as the least likely to materialize.
The CEOs and policymakers I spoke to during last month’s World Economic Forum (WEF) in Davos echoed this sentiment. The fact that the global economy did not slip into recession in 2023, despite the sharp rise in interest rates, left many experts upbeat about the outlook for 2024. When asked to explain their optimism, they either cited the US economy’s better-than-expected performance or predicted that artificial intelligence would catalyze a much-hoped-for productivity surge. As one finance minister remarked, “If you are not naturally optimistic, you should not be a finance minister.”
The world’s economists appear to share this outlook. The WEF’s Chief Economists Outlook for January 2024 found that while a majority of respondents foresaw a mild global downturn in 2024, most were not overly concerned and viewed the expected slowdown as a healthy correction to the inflationary pressures caused by excessive demand.