Moderate recovery of world economy faces many challenges, emerging economies show vitality

In 2023, the world economic performance exceeded the expectations of many international institutions. Extreme situations such as economic recession and deep-seated financial crisis that the international community was worried about have not occurred, but weak economic recovery still plagues most countries. This development trend has set the tone for the world economy in 2024: potential resilience gives the international community reason to have more expectations, but challenges still cannot be ignored.

Emerging economies show vitality

The "World Economic Outlook" released by the International Monetary Fund predicts that the world economy will grow by 2.9% in 2024, 0.1 percentage points lower than in 2023. The Organization for Economic Cooperation and Development predicts that the world economy will grow by 2.7% in 2024, 0.2 percentage points lower than in 2023.

International institutions generally believe that because the world economic performance in 2023 exceeds expectations and forms a higher base, and the economic growth rate of developed economies is expected to decline, the world economic growth rate in 2024 will be lower than that in 2023, but it will also be more predictable. sex, and have a solid foundation for achieving a moderate recovery.

China's economy will remain an important source of power for world economic growth. Goldman Sachs' global macroeconomic research report points out that China's economic growth is expected to reach 4.8% in 2024 against the backdrop of policy support, rising investment, and moderate growth in consumer spending. China's recovery in domestic demand will drive global economic growth by about 1% in 2023, and this growth momentum will continue in 2024.

Chen Fengying, a researcher at the China Institute of Contemporary International Relations, said that China’s economy will be adapting to the new environment in 2023, and its performance will have certain ups and downs. As policies continue to develop and business entities gradually adapt to the external environment, China's economy will become more stable in 2024, laying a more solid foundation for the recovery of the world economy.

The strong vitality displayed by emerging economies is also an important factor in the world economy getting rid of pessimistic expectations in 2024. The International Monetary Fund report pointed out that many emerging economies have shown stronger than expected resilience. It is expected that the economic growth rate of emerging economies will reach 4.0% in 2024, which is significantly higher than the 1.4% growth rate of developed economies in the same period. Taking Southeast Asia as an example, on the one hand, the region has a large population base, rich resource endowments, and broad market space. On the other hand, the region's economic structure continues to be optimized and upgraded, and its degree of openness continues to increase. As the Regional Comprehensive Economic Partnership Agreement takes full effect, Southeast Asian countries will have closer economic ties with other countries, their market potential will be further released, and their role in the world economy will become increasingly important.

From an industry perspective, the green economy and digital economy are booming and will continue to become an important growth point for the world economy in 2024. The new energy vehicle industry is ushering in an investment boom globally, and market penetration is increasing rapidly. Investors' enthusiasm for artificial intelligence continues unabated. Companies are launching self-developed large-scale models one after another. Artificial intelligence is being applied to more and more scenarios, and its role in promoting the world economy will become increasingly significant. Some market research institutions predict that global enterprises’ investment in generative artificial intelligence will exceed US$40 billion in 2024, more than doubling compared with 2023.

Serious problems have been alleviated

Some of the problems that have seriously plagued the world economy in the past few years will be alleviated in 2024, creating conditions for the world economy to achieve a moderate recovery.

As the impact of the COVID-19 epidemic weakens, people's confidence in the economy will gradually recover. "In 2023, we saw signs of significant improvement. We believe that in 2024, people will further recover from the impact of the new crown epidemic." Chen Fengying said.

The restoration of confidence has been reflected in the trade field. The World Trade Organization predicts that global trade growth will be 0.8% in 2023 and will reach 3.3% in 2024. Problems such as insufficient shipping capacity that severely restricted global trade during the epidemic no longer exist. The smoothness of the supply chain has been greatly improved. Coupled with the gradual economic recovery of various countries, the investment, production and export confidence of enterprises have continued to recover, promoting the improvement of global trade.

The optimization of trade structure is also an important driving force for global trade growth. Zhou Mi, a researcher at the Ministry of Commerce Research Institute, said that as green economy has become a global development consensus, the market demand for green products has increased significantly, significantly boosting global trade. "For example, new energy vehicles and lithium batteries have become new highlights in global trade in recent years, and it is expected that this trend will continue in 2024." Zhou Mi said that agricultural product trade is also expected to show greater vitality, because many countries have increased agricultural product trade. access and openness.

High inflation and the implementation of monetary tightening policies by some major economies have caused serious disruptions to the world economy in the past two years. Chen Fengying said that global inflation will be significantly eased in 2024, and the monetary policies of major economies will also become looser.

The International Monetary Fund predicts that the overall global inflation rate will drop to 5.8% in 2024, indicating that global inflationary pressure is gradually easing as the economy returns to stability and policy effects appear. Inflation is expected to return to the 2% target in most major economies by the end of 2025.

The significant cooling of inflation has given countries the conditions to change their monetary tightening policies. The minutes of the Federal Reserve’s December 2023 interest rate meeting showed that its policy interest rate may be at the peak of this tightening cycle. Market analysts generally believe that the Federal Reserve has ended this round of interest rate hikes and will begin cutting interest rates in 2024. This gives other economies, especially some emerging economies with fragile financial systems, greater policy space.

Multiple challenges cannot be ignored

Although the international community has many reasons to get rid of pessimistic expectations, the challenges facing the world economy still cannot be ignored.

On January 4, the United Nations Department of Economic and Social Affairs released the "World Economic Situation and Prospects for 2024" stating that although the world economic performance in 2023 exceeded expectations, there are still structural vulnerabilities and more investment is needed to restore growth and cope with the epidemic. climate change and accelerating the achievement of the sustainable development goals.

Recently, tensions in the Red Sea have escalated, and international shipping companies have suspended navigation in the Red Sea. This reminds the international community that geopolitical conflicts may bring new disruptions to the world economy at any time. In recent years, the world economy has been impacted by issues such as the Russia-Ukraine conflict and tensions in the Middle East. Related issues have not yet been effectively resolved. Some regions have also shown new conflict risks, which may cause energy prices to rise again and make the inflation problem once again prominent. Geopolitical conflicts will also hinder multilateral cooperation and weaken the effectiveness of international cooperation and coordination mechanisms.

Unilateralism and protectionism are still serious challenges facing the world economy. The promotion of "decoupling" and "de-risking" by individual countries has brought obstacles to global trade, cross-border capital flows, technology and personnel flows, etc., forcing companies to rearrange their supply chains, causing operating costs to rise significantly, and investment confidence to be low. International Monetary Fund President Georgieva recently stated that if the trend of world economic fragmentation is allowed to continue, global gross domestic product (GDP) will lose 7%, which is roughly equivalent to the combined GDP of France and Germany in one year.

The risk of extreme weather events caused by natural disasters and climate change is increasing, and their impact on the world economy is becoming increasingly significant. Zhou Mi said that natural disasters such as earthquakes, floods, and droughts may cause huge damage to agriculture and global supply chains, setting back the economic development efforts of some countries and regions.

In addition, the international community must be fully mentally prepared to deal with possible "black swan" events. After all, compared to foreseeable challenges, the impact of unforeseen emergencies may be the most difficult to deal with.