Economists Feel Pretty Rosy About This Year. Next Year’s Another Story

Economists Feel Pretty Rosy About This Year. Next Year’s Another Story
Reda Farran, CFA

3 months ago2 mins

Economists don’t always agree with each other – sometimes they don’t even agree with their past selves. This chart illustrates how economists' forecasts for global growth this year and next have shifted and diverged since the start of 2023. Since January, economists have raised their estimates for this year's performance by nearly 1 percentage point, to 2.4%, as stronger-than-expected consumer demand and labor markets have shielded the global economy from a major slowdown. In contrast, they’ve also been slashing their 2024 forecasts, with growth now expected to come in at 2.1%, according to a compiled analysis by consultancy Consensus Economics.

There are a few reasons for that pessimism. First, this year’s better-than-expected economic performance would flatten growth in 2024 due to the base effect, which refers to the impact that a high growth rate in one period has on the comparative growth rate in the next. Second, strong consumer demand and higher wages are expected to keep inflation higher for longer, forcing central banks in advanced economies to keep interest rates elevated well into next year. Those high interest rates are, in turn, expected to weigh on economic growth. Third, China’s disappointing post-pandemic economic recovery makes it hard to be an optimist. After all, China was pegged to be the top contributor to global growth over the next five years, with a share expected to represent 22.6% of the total, according to the International Monetary Fund.

The takeaway here is that while investors had entered 2023 bracing themselves for a significant economic slowdown, the global economy has proved to be quite resilient. That’s prompted economists to revise their initially gloomy forecasts for the year, pushing their expectations of a slowdown to 2024 instead. But it also demonstrates that you should always take economic forecasts with a grain of salt, bearing in mind that they can change based on a myriad of unpredictable factors.



All the daily investing news and insights you need in one subscription.

Learn More

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG