Chief Economists Outlook: Global Economy Stabilizing, Weakness Remains

Source: WORLD ECONOMIC FORUM

https://cn.weforum.org/stories/2024/10/chief-economists-outlook-global-economy-growth-cn/

The global economic outlook is stabilizing amidst ongoing economic uncertainty.

The Chief Economists Outlook released by the World Economic Forum in September 2024 shows that most chief economists (54%) believe the global economy will remain unchanged over the next year, while more than a third (37%) predict a recession.

The report states: "Cautious optimism is justified by factors such as easing inflation and the recovery of global business. However, if the economy is stabilizing, its stability is at the weakest level seen in decades."

The Chief Economists Outlook, published three times a year, surveys chief economists from various industries and international organizations. The latest edition explores key global economic trends, including updates on growth and inflation, the impact of high debt levels, and the prospects for a new growth agenda.

The report adds: "Policymakers face dual challenges: raising economic growth rates while shaping its structural characteristics, such as reducing the environmental destructiveness of growth or minimizing the risk of certain societal groups being 'left behind' by economic expansion."

Brewing Storms

Most of the surveyed chief economists believe that public debt burdens pose a threat to macroeconomic stability in both developed economies (53%) and developing economies (64%).

The combination of rising debt levels and high interest rates has increased the interest payment burdens of many countries to damaging levels. The rising cost of debt repayment is leading to fiscal tightening, and most respondents indicated that current debt dynamics will undermine government efforts to stimulate economic growth over the next year and leave countries ill-prepared for future recessions.

The report states: "Many countries face fiscal challenges, suggesting they may struggle to prepare for ongoing structural changes, such as the energy transition, demographic shifts, and evolving national security demands."

Nearly 40% of chief economists predict that default rates in developing economies will rise next year.

The report further emphasizes that limited fiscal space will leave countries (59% of developed economies and 82% of developing economies) underprepared for policy challenges and future crises.

"If debt sustainability continues to severely constrain the ability of countries to spend, they may struggle to prepare for changes such as energy transitions, demographic shifts, climate disasters, rapid technological changes, and evolving national security needs."

Additionally, the report warns that the next major global economic shock could trigger a debt crisis, exposing years of accumulated fiscal risks.

The report concludes: "Prolonged fiscal tightening will also hinder efforts to invest in a more balanced growth agenda."

Regional Outlooks

The United States, despite prolonged monetary tightening and recent labor market challenges, is expected to achieve a soft landing. Nearly 90% of economists predict moderate or better growth for the U.S. in 2024 and 2025. The upcoming election is seen as a critical turning point for U.S. and global political and economic policies, with 80% of respondents believing that the outcome will significantly impact global economic strategies.

Europe’s economic outlook is improving. Economists are cautiously optimistic, with 53% forecasting moderate or better growth for Europe by 2025, nearly double the 29% forecast for 2024.

Asia remains the most promising region, particularly South Asia, where 70% of economists expect strong or very strong growth. Central Asia and East Asia and the Pacific are also performing well.

Elsewhere, economic prospects are stable or improving. The growth outlook for the Middle East and North Africa remains optimistic but uncertain, while Latin America, the Caribbean, and sub-Saharan Africa are expected to outperform global average growth levels.

Global Inflation Trends

Global inflation continues to decline, but the pace of decline is slowing.

Respondents are confident that the U.S. has reversed its inflationary trend, with the proportion of those predicting high inflation dropping from 21% in 2024 to 6% in 2025. Inflation is seen to be moving in a favorable direction globally. For instance, in China, the proportion of economists predicting extremely low inflation dropped from 33% in 2024 to 16% in 2025, raising hopes that the prolonged period of deflation will end.

As a result, monetary policy in many countries and regions is shifting toward easing. In the U.S. and Europe, 90% of economists predict a return to looser monetary policies within the next year, with most forecasting monetary easing across all regions except Central Asia and sub-Saharan Africa.

Prospects for a New Growth Agenda

When asked about the outlook for a new growth agenda, economists overwhelmingly agree on the importance of balancing growth with other policy priorities. Roughly two-thirds of respondents believe decision-makers should prioritize economic growth, while a similar proportion agrees that progress must be made on other objectives, even at the expense of growth.

The main barriers to achieving a better balance are a lack of domestic political consensus or will (91%) and insufficient global cooperation (67%). Economists believe domestic political obstacles are more about leadership and trust challenges rather than widespread opposition. The lack of global cooperation is also influenced by domestic political trends (83%) and strongly shaped by geopolitical tensions (91%).

Economists were asked to assess whether pursuing economic growth requires trade-offs or sacrifices in four other potential policy goals: environmental sustainability, economic equality, social cohesion, and national security.

In terms of equality and security, only 12% of respondents believe significant trade-offs are needed. For social cohesion, this figure rises to 21%. Environmental sustainability showed the most division, with 44% agreeing and 44% disagreeing on the need for compromises.

The report concludes: "Long-term economic agendas may increasingly be shaped by broader issues, such as what kind of growth is desirable and achievable."

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