WEF's Latest Chief Economists Outlook For May 2024 Highlights Increased Economic Optimism

The World Economic Forum (WEF) has unveiled its May 2024 Chief Economists Outlook, revealing a mix of persistent uncertainty and increased optimism. The survey shows a significant drop in the percentage of chief economists predicting a decline in global conditions this year, from 56 percent in January to 17 percent.

According to the WEF's monthly report, 97 percent of respondents agree that geopolitics will continue to cause global economic volatility throughout 2024. With nearly half of the world's population voting this year, 83 percent also foresee domestic politics as a source of instability. However, over two-thirds of the chief economists do not believe rapid technological advances, such as artificial intelligence (AI), will contribute to volatility this year.

Regionally, the growth outlook has become more positive but remains uneven. The most notable improvement is in the US, where 97 percent of respondents now expect moderate or stronger growth in 2024, up from 59 percent in January. In Asia, all respondents anticipate at least moderate growth in South Asia, East Asia, and the Pacific. China is an exception, with about three-quarters expecting moderate growth, an increase from 69 percent in January.

In Europe, the outlook remains largely unchanged since the previous edition, with almost seven in ten still predicting weak growth this year. Elsewhere, moderate growth is expected with slight improvements noted since the last report.

Inflation expectations are converging towards a broadly moderate outlook across most regions. This is partly due to optimism about global supply chains. However, expectations for looser labour market conditions have weakened since January. Respondents anticipate less synchronised monetary policy for the remainder of 2024, with signs of loosening in some regions. The fiscal stance is expected to remain unchanged in most areas.

Challenges for Businesses and Policy-Makers

The survey highlights growing challenges for businesses and policy-makers. Nearly four-fifths (79 percent) of chief economists cited heightened complexity as a significant challenge for decision-makers. An even larger share (86 percent) pointed to tensions between political and economic dynamics as a major issue.

Core economic factors are expected to drive corporate decision-making this year. These include the overall health of the global economy (100 percent), monetary policy (86 percent), financial markets (86 percent), and labour market conditions (79 percent). Geopolitical (86 percent) and domestic political factors (71 percent) are also seen as influential.

Long-Term Economic Prospects

Looking ahead, there is further optimism about long-term global economic prospects. Nearly seven in ten respondents expect global growth to return to 4 percent within the next five years, with 42 percent anticipating this within three years. Chief economists unanimously expect technological transformation, AI, and the green and energy transition to drive growth in high-income economies over the next five years.

However, there are divided views on how these factors will impact low-income economies. Geopolitics, domestic politics, debt levels, climate change, and social polarisation are all expected to negatively affect growth in both high- and low-income economies.

Effective Growth Policies

When asked about policies likely to boost growth over the next five years, respondents highlighted innovation, infrastructure development, education and skills improvement, and looser monetary policy as promising across all regions. In areas such as institutions, social services, and access to finance, more respondents see these as effective growth drivers for low-income rather than high-income economies.

The survey also reveals a lack of consensus on how environmental policy and industrial policy might influence growth.

With inputs from WAM