Forecasters Still Predict Economic Growth in 2024, but It Won’t Be as Strong

Developed economies will feel the slowdown more — and run a greater risk of recession. 

The global economy should continue to grow by 3.1% this year, but most advanced economies will struggle to break 2%, the International Monetary Fund reports in an updated prediction for 2024. 

Slower growth is a sign that anti-inflation efforts are working. And more forecasters say a “soft landing” has a much greater likelihood of occurring.

But if growth slows too much, some economies could tip into a recession. Just a few months into 2024, a handful of countries and regions are seeing lower forecasts for economic growth this year. 

• The European Union now expects growth of 0.9% for the year instead of 1.3%. The euro area has a forecast of 0.8% compared to its previous outlook of 1.2%. Policymakers expect growth to pick up as the year goes on and inflation continues to ease.
  
• The UK, which fell into recession in the second half of 2023, is forecast to grow by 0.6% this year, according to the IMF. Though growth is weak now, the Bank of England believes it will gain momentum as the year progresses.

• German leaders now see growth of 0.2% for the year, blaming an unstable global economy and a lack of growth in international trade. It’s a sharp cut from the 1.3% they had previously reported. Germany may already be in a recession.

• France has cut its forecast from 1.4% to 1% and will reduce government spending as a result. Leaders cited geopolitical concerns, including the Russia-Ukraine war and fighting and disruptions in the Middle East.
  
• China is expected to grow but by less than the 5.2% growth recorded in 2023. The average forecast from five large investment banks put the predicted growth closer to 4.6%. Reduced demand, geopolitical tensions and major problems in the country’s property sector were all cited as factors. 

• The Reserve Bank of Australia cut its growth forecast “modestly” to 1.3% growth by June, compared to the 1.8% forecast last fall. Weaker growth in domestic spending is a big reason, along with weaker demand from China, a key trading partner.

Emerging and developing countries, which typically grow at a faster rate, are expected to see lower rates, around 4%. Compared to a growth rate of 4.4% in normal times, that might represent a move toward normalization, not a slowdown, the Conference Board said. 

Some forecasters think overall growth might be better than expected

The outlook isn’t entirely negative, though. While many advanced economies are looking at lower growth, especially in Western Europe, some forecasters have adjusted their global outlooks upward in recent weeks.

For example, while the IMF’s current forecast of 3.1% is lower than the 3.8% average set over the past couple of decades, it’s actually 0.2 percentage points higher than the organization’s October report.  

The IMF also predicted higher growth for India in the country’s current financial year, which ends in late March. It’s now expected to hit 6.7%, not 6.3%, as predicted last fall. The IMF is forecasting 6.5% growth for the financial year starting April 1. 

Similarly, the Conference Board has adjusted its prediction for global growth from 2.7% to 2.8%. The board upgraded its forecast for the US from 1.4% to 1.9% for the year. Its outlook for Europe is actually higher, too, because the forecast for Eastern Europe is strong. 

S&P Global Market Intelligence is now expecting 2.5% global growth, higher than the 2.3% previously reported. 

Factors driving these upward revisions: 

• One consideration is stronger-than-predicted results in the US. The country finished 2023 with higher growth than anyone expected. (Swiss Re questions just how strong the US economy is, though, and still predicts four quarters of below-average growth starting later this year.)
  
• Another reason is stronger upcoming demand as tracked by S&P Global’s Purchasing Managers’ Index.
  
• Inflation is falling faster than expected in many countries, giving central banks more cover to reduce benchmark interest rates. As rates decline, that makes it easier to borrow, spurring growth. 

Keep an eye on growth rates going forward

While hopes are high for interest rate cuts, policymakers in many countries are still serious about pushing inflation back toward the standard target of 2%. If inflation remains persistent, and if central banks delay making rate cuts, there’s a higher chance that some economies will flirt with or fall into recession. 

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