Chase Buchanan, the global expat wealth management and financial advisory firm, has shared some insights into the evolving forecasts for the economic year ahead - which many are closely following after an extended period of internationally high inflation and concerns around market stability.
While the economic growth outlook published by the International Monetary Fund (IMF) has been revised to reflect a slower than originally anticipated growth rate of 3%, the long-term prospects appear to be more optimistic and indicate a likelihood that markets will soon be on a bounce-back trajectory.
The Economic Picture for 2024
Lee Eldridge, Group CEO and Head of Investment Advisory at Chase Buchanan explains that one of the key factors that has driven low growth rates around the world is inflation – where price rises move faster than national targets, which are normally set at around 2%. In short, inflation means that the purchasing power of a currency falls and can buy fewer goods or services than previously.
From spikes in inflation that reached over 10% in several countries over the last two years, including in the UK and EU, these statistics have started to cool significantly, with many regions reporting the latest inflation figures at less than half their peak.
For example, UK inflation is now at 4% against over 10% in 2022, and EU countries have an average inflation level of 2.9%, a distinct improvement from 10.9%.
According to the IMF's most recent updates in October 2023:
- International inflation is becoming better controlled by central banks, primarily using higher base rates to reduce spending and borrowing and bring inflation back in line with targets.
- The global measurement of inflation is expected to drop from 9.2% during 2022 to 5.9% during 2023 and fall further to 4.8% in 2024.
Of course, a global average inflation of 4.8% will look very different between countries. However, the bigger picture is that inflation is begrudgingly reducing across the board, which will, in turn, create a more positive environment for businesses, employment and cross-border trade.
How Will International Markets Recover in 2024?
A side effect of sustained inflation is that economic activity also falls. That means growth is slower and has influenced the IMF forecasts for the year ahead. That said, it is likely that we have already seen the last hikes in interest rates in most of the larger economic countries.
Global trade has been severely impacted over the last two years, partially due to reductions in manufacturing and logistics capacity – which have also been affected by conflicts, political instability and the long-term outcomes of the COVID-19 pandemic.
Issues caused by inflation can also include slow or negative wage growth, price volatility for commodities, particularly energy, and a reluctance to invest while prices and interest rates are high.
The good news, as Eldridge explains, is that in a marked improvement to a negative -0.6% global GDP growth expected for 2023, analysts anticipate a recovery to 3.3% during 2024, a marginally higher projection than published by the IMF in October last year.
Irrespective of the actual figures recorded, the consensus is that GDP will move away from negative contraction and to a position of positive growth – an excellent sign for all sectors and industries who have been eagerly awaiting some signs that recovery is coming.
As always, those international averages will differ between countries, with GDP growth expected to be around 1.1% in the USA during 2024, increasing to 1.7% in 2025. European countries such as France and Germany are predicted to log GDP growth of 0.7% in 2024, with a similarly better picture in 2025 with an anticipated 1.6% growth rate.
What Will Global Economic Recovery Mean?
Eldridge clarifies that ‘Currently, we are seeing financial modelling forecasts and projections that unanimously show signs of slowing inflation, reducing pressure on commodity markets, improvements in employment sectors and returns to positive GDP growth.
While central banks still have an important role to play, and individual countries and governments must continue to monitor and address their unique inflation environment, the overall signals tell us that, after a challenging couple of years for so many, there is, at last, a tangible sign of better times ahead.
The IMF is often used as a baseline for economic forecasting. Although there remain areas where inflation is stubborn and will subside at a slower pace, its forecasts are based on resilience, generating growth, albeit at a gradual trajectory, in 2024.
Moving on to 2025, the picture improves further, with GDP growth expected to double from 2024 in most of the developed nations, and presenting a climate where optimism, investment and on-target inflation are far more likely to occur.’
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About Chase Buchanan Private Wealth Management
Chase Buchanan is a highly regulated wealth management company who specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, France, Malta, wealth management Portugal, Spain, UK and the USA.
Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.
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Published by: Steve OBrien