Financial Forecast: What's Next for the Economy?

Individual countries can experience rises and falls in their economies without other countries experiencing the same thing. However, all economies are tied to the global economy to some extent and, what happens globally is likely to affect all economies. If you want to keep abreast of what is happening and prepare your finances accordingly, you need to know what is next for the global economy.

Current Status

The global economy has been rocked in recent years. Russia has played a significant role in market volatility, the increase in inflation, and commodity scarcity. Their invasion of Ukraine has caused investors to leave Russia, many are also leaving China and other countries aligned with the Russian goal. It's a sad state of affairs. Yet, despite this, there is a mood of cautious optimism by global economists regarding the global economy. This is because most economies have appeared to be resilient to inflation and commodity scarcity. In fact, many economies are seeing increased signs of growth. Of course, the optimism is tempered by the array of conflicts currently going on and their potential effect on the world economy.

Inflation Rates

Expectations are high for 2024. Economists believe that inflation rates will continue to fall in many countries, including the US, Europe, Central Asia, China, and North Africa. In fact, economists only see inflation rates continuing to be a problem in Latin America and Sub-Saharan Africa. In contrast, the US and Asian economies are expected to see strong economic growth, and China, Latin America, and Sub-Saharan Africa should see more moderate growth. In contrast, Europe is expected to see sluggish growth. This should help the global economy to grow at a rate of 2.9% in 2024, just slightly under the 3% it grew in 2023. It's worth noting that economists see most growth in emerging markets, and advanced economies will see much slower growth.

Geopolitical Tension

All global economists agree that the geopolitical tensions experienced in recent years will continue to worsen in 2024. In fact, economists believe it will become significantly worse. This will lead to increased market volatility, you can expect to see significant price changes, both up and down, in stock markets across the globe. Alongside this, the increased geopolitical tensions are likely to create more localised markets. This will include the strengthening of existing geoeconomic blocks and a bigger divide between the Global North and South. Geopolitical tensions will cause more trade restrictions with low-income economies taking the brunt of the damage. Although less likely, experts also predict that the ongoing geopolitical tensions will cause more ruptures in the supply chain and a reduction of global economic activity.

China Is Likely To Struggle

China looked like it was unstoppable. Expectations were that the economy would overtake the US by 2030. However, it is now evident there are a host of issues in China. Unlike other areas of Asia, China is experiencing a reduction in growth. Where their economy was growing strongly, it is now expected to only see moderate growth. This is likely to cause an issue for Chinese citizens who will see a downturn in their fortunes. Unfortunately, this will have a knock-on effect on other economies as the Chinese have been a major purchasing power in recent years. It's unclear yet how serious the economic downturn will be in China but it will have a significant effect on the global economy and product availability.

Artificial Intelligence

It appears we have already started down the AI road and are unlikely to be able to turn back. As its prevalence grows AI is certain to affect global economies. On the plus side, it will make production processes faster and simpler. However, this will lead to job losses. The main question is how this will affect the economy. Developing countries will, no doubt, appreciate the intervention of AI as it will raise employer productivity. Advanced economies can use AI to help offset reduced labour availability. In theory, both of these factors should make the economy more buoyant.

No Change In Employment Rate

Interestingly, despite the emergence of AI and the other potential issues the economy is likely to struggle with, unemployment rates are predicted to stay the same. It's estimated around 5% of the US will be unemployed in 2025, the same as in 2023 and 2024. Low levels of unemployment will help the economy recover and survive any issues over the coming year.

Summing Up

It should be noted that the above are simply projections and expectations. The economy is fluid and there are a huge number of factors which can change at any given time. This could lead to better growth than forecast or even a global recession. However, the general consensus is of a cautiously optimistic outlook for the economy. That's worth clinging to!