2024 international economic outlook

Summary

Key themes

• As we head into 2024, we are downbeat on the prospects for global GDP growth. In our view, the global economy is likely to experience a period of below-trend growth in 2024, with the global economy expanding just 2.4%. Growth prospects are to be restrained by a U.S. economy likely to experience a mild recession in mid-2024, recessions in the Eurozone and U.K., as well as a Chinese economy that is decelerating amid structural challenges. We do, however, believe select economies can outperform and grow at above-trend rates. Asia, in particular India, should be the region and economy that stands out from a growth perspective.

• With the growth outlook less-than-robust and inflation receding quickly, we expect many of the world's central banks to begin, or continue, cutting interest rates in 2024. In the advanced economies, we believe most G10 central banks will start cutting policy rates in Q2-2024; however, risks are tilted toward earlier easing as inflation falls back toward targets. Emerging market central banks that have initiated easing cycles already should continue cutting, while those that have been more prudent should start in the coming quarters. With that said, we believe policymakers in the developing world will still act cautiously when considering easing monetary policy.

• Our views on currency markets have not materially changed. We continue to believe that with major central banks on hold for the time being, relative economic outperformance will be the catalyst for one last bout of U.S. dollar strength. As the U.S. economy falls into recession and the Fed begins easing monetary policy, we believe the dollar can depreciate against both G10 and emerging market currencies. We believe the economic and monetary policy backdrop in 2024 will be consistent with emerging market currency outperformance, and in our view, select currencies in Latin America and EMEA can perform most strongly.

• Geopolitics and elections add a degree of uncertainty to the global economy and financial markets in 2024. The Russia-Ukraine conflict is still active, and the Israel-Hamas war does not appear to have an end in sight. Geopolitical developments can lead to further deglobalization, and possibly a fragmenting of the global economy, both of which can place new downward pressure on global activity. In addition, multiple meaningful elections will take place in 2024, and while not all will be affected by geopolitics or create local financial market volatility, select votes can create disruption and alter the global political landscape.

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