Global Outlook 2024 - Back to not so normal

Looking back, if we were to sum up the economy in 2023 in one word, it would be resilience. Considering the succession of shocks the global economy has faced in recent years – the most recent being the steepest interest rate rises in decades – it is a wonder that the hot topic right now isn't crisis and recession. What about next year? Following the resilience of 2023, we expect 2024 to be a year of normalisation. By the end of next year, we expect inflation to be back at 2%, growth to have returned to trend, and central banks to be well on their way to bringing rates down to more normal levels. So far, so benign. But 2024 also brings a lot of risks. Chief among these is the US presidential election in November, which could herald the return of president Trump. His plan for sweeping new tariffs would put disinflation into reverse, potentially causing rates to start rising again. Another key risk to watch is the outcome of the European Commission's probe into China EV subsidies. Finally, although we do expect policy rates to fall next year (and bond yields have already fallen in anticipation of this), given the monetary policy lags, there is still a risk that there could be more economic weakness in train from high rates than we currently foresee.

Aside from the near-term cyclical worries, in this Global Outlook we also tackle some more structural themes. First, we look at whether higher rates are here to stay, and – related to this – whether persistent price shocks are going to be the new normal (and how willing central banks will be to accommodate them). We also look at a major issue challenging policymakers in recent years – particularly since the pandemic – which is the worsening reliability of statistics, which has meant they (and we) are to some degree ‘flying blind’ in assessing the economy. Finally, we explore what the recent Dutch elections – which led to a surge in support for the far right – might mean for climate policy and the energy transition. To some degree, we think we are likely to see a watering down of climate targets, and this could end up being part of a broader international backlash against climate policy. Next year’s European Parliament elections will be an important test of that.

Wherever developments take us in 2024, we wish our readers a restful holiday period, and a happy new year!

Have we dodged recession? It depends how you define it (and where you look)

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