In 2023, the global economy experienced its second consecutive year of slowdown after the strong rebound of 2021, in line with forecasts. According to the World Bank's preliminary estimates, real gross domestic product grew by 2.6% compared to 2022 after registering 3% growth the previous year. This decline is entirely attributable to the advanced economies, whose growth decreased from 2.5% in 2022 to 1.5% in 2023, and more specifically to the Eurozone, whose growth rate was only 0.4% in 2023, compared to 3.4% in 2022. The U.S. economy, on the other hand, performed better than expected. Growth in emerging markets and developing economies, at 4%, is in line with expectations.
We are not ready to see a rebound as yet. In its forecasts published in January 2024, the World Bank puts forward the hypothesis of global growth at 2.4% in 2024, i.e. a third consecutive year of slowdown. A trend that the institution explains by "tight monetary policies and restrictive credit conditions, anaemic global trade and investment", all compounded by the recent conflict in the Middle East that "has heightened geopolitical risks and uncertainty in commodity markets, which could negatively impact global growth".
*Estimate; **Forecast – Data source: World Bank
The performance of emerging markets and developing economies promises to be significantly better than that of advanced economies as there should be a threefold difference between them. Again this year, the Eurozone will lag behind, with GDP growth estimated at only 0.7% in 2023, compared to 1.2% for advanced economies globally. Japan will have to make do with 0.9% while the United States, despite seeing a slowdown from 2023, will drive growth in advanced economies with a 1.6% increase. On the other hand, Egypt's growth potential has been significantly reduced by the World Bank.
While emerging markets and developing economies grew in 2023, the World Bank now expects the growth rate to remain relatively stagnant for the next two years, at 3.9% in 2024 and 4% in 2025. The South Asia and East Asia/Pacific regions are expected to record the best performances, with increases of 5.6% and 4.5% respectively in 2024.
India should continue to lead the way, ahead of Bangladesh, Indonesia, China and Saudia Arabia. The forecast is also in very slight decline for China, but it should be noted that the world's second largest economy achieved a GDP growth of 5.2% in 2023, well above the 4.3% predicted by the World Bank at the beginning of the year.
**Forecast – Data Source: World Bank
As is often the case, the International Monetary Fund and the OECD are more optimistic in their forecasts. The OECD forecasts global growth at 3.1% in 2024 and 2.9% in 2025, according to its updated forecast in February 2024. As for the IMF, it is on the same wavelength as the OECD for 2024 and sees a continuation of the rebound in 2025 at 3.2%. "The forecast for 2024 is 0.2 percentage points higher than the October 2023 World Economic Outlook (WEO) on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China", the IMF said.
The IMF is less pessimistic than the World Bank for the eurozone, whereas the OECD is more cautious.
Sources: World Bank, OECD, IMF, European Commission
Within the eurozone, the situation remains difficult for Germany, which is expected to grow between 0.3% and 0.5% in 2024 according to different estimate sources, after a recession of 0.3% in 2023. In France and Italy, growth will also remain quite sluggish. Spain, after a significantly above-average performance in 2023, is expected to experience a slowdown, while maintaining above-average growth in the euro area. The United Kingdom is expected to grow by about 0.6% in 2024.
The various institutions predict that the pace of growth will rise again in 2025, but in moderate proportions.
Sources : OECD, IMF, European Commission
From the beginning of the summer of 2022, in Europe and the United States, central banks have put in place very vigorous measures to curb galloping inflation. These remedies have paid off. "Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down", indicates the IMF. "Inflation is expected to return to its target in most G20 countries by the end of 2025. Headline inflation in the G20 economies is projected to drop from 6.6% in 2024 to 3.8% in 2025, with core inflation in the G20 advanced economies easing to 2.5% in 2024 and 2.1% in 2025", confirms the OECD.
In theory, this improvement paves the way for a loosening of monetary policies, with lower interest rates likely to boost investment and consumption. But central banks are being extremely cautious.
The OECD agrees with them. "It is too soon to be sure that underlying price pressures are fully contained. Labour market conditions have become better balanced, but unit labour cost growth generally remains above rates compatible with medium-term inflation objectives", warns the organisation. In particular, the OECD believes that "high geopolitical tensions are a significant near-term risk to activity and inflation, particularly if the conflict in the Middle East were to disrupt energy markets".
As for the United States and Europe, the inflationary situation has therefore calmed down but not completely stabilised. China, on the other hand, recorded three consecutive months of deflation in the fourth quarter, reflecting the country's economic difficulties, particularly in the real estate sector. However, the IMF is quite optimistic. "Additional property sector-related reforms including faster restructuring of insolvent property developers while protecting home buyers’ interests or larger-than-expected fiscal support could boost consumer confidence, bolster private demand, and generate positive cross-border growth spillovers," says the institution. The Chinese government announced on 24 January a new series of measures to financially support Chinese real estate players.
Upply - data source: Eurostat, US Labour Department, National Bureau of Statistics of China
In 2023, world trade growth reached its lowest level in the last 50 years outside of global recessions, the World Bank says. This is due in particular to a contraction in merchandise trade, in a context of floundering industrial production. Indeed, in its updated forecast in October 2023, the World Trade Organization (WTO) announced a growth of 0.8% in the volume of merchandise trade in 2023, instead of the 1.7% announced in its previous forecast in April. "The trade slowdown appears to be broad-based, involving a large number of countries and a wide array of goods, specifically certain categories of manufactures such as iron and steel, office and telecom equipment, textiles, and clothing. A notable exception is passenger vehicles, sales of which have surged in 2023", said the WTO. At the same time, trade in services continued to recover from the effects of the pandemic, but at a slower pace than expected.
World trade growth is expected to pick up to reach 2.3% in 2024, driven in part by a recovery in demand for goods and, more broadly, trade from advanced economies, the World Bank estimates. For its part, the IMF puts forward a growth forecast of 3.3% in 2024 and 3.6% in 2025, which still corresponds to "rates below the historical average of 4.9%", says the IMF.
In terms of volumes, world merchandise trade is also expected to rebound, with the WTO forecasting a progression of 3.3% in 2024, which corresponds to a clear recovery from 0.8% in 2023.
Source: WTO
Despite this positive forecast, economists are not hiding some concerns about the outlook for world trade. The WTO refers to "obvious fragmentation", even if globalisation itself is not called into question. As is recalled by the IMF, citing data from Global Trade Alert, countries actually imposed about 3,200 new trade restrictions in 2022 and about 3,000 in 2023, up from around 1,100 in 2019. This is a concerning development for the OECD, as the organisation believes that "Open and well-functioning international markets under a rules-based global trading system are an important source of long-term prosperity for both advanced and emerging-market economies".
In 2021, driven by strong demand, transport prices had increased significantly, although very variably depending on the mode of transport.
Example of changes in transport prices: maritime Asia-Europe, air Asia-Europe, Route Europe – Source: Upply Freight Index
Geopolitical instability is often presented as the major risk to the resilience of supply chains at the beginning of 2024. But it is interesting to note that other parameters are included in the Top 5 of the Allianz 2024 risk barometer for the transport and logistics sector.
Changes in legislation and regulations, which include the effects of trade and tariff wars, are at the top of the list of risks, while "business interruption", a fairly broad term including supply chain disruptions, is also rising up the rankings. These two factors can be considered partly related to the geopolitical context. But between the two is a factor that was not in the Top 5 last year: theft, fraud and corruption. Natural disasters also enter this top 5, just after the risk of a cyber incident.
Source: Allianz Risk Barometer 2024
According to the forecasts made at the beginning of the year by the major international institutions, the growth of the world economy should reach a low point in 2024 before resuming in 2025. Global trade, meanwhile, is expected to restart as early as 2024 after a very difficult 2023, but with deeply changing patterns, in a more fragmented world. This requires the development of increasingly complex supply chains, which will add value to the expertise of professionals in the field within the companies. In addition, transport and logistics players are entering a less favourable period that will affect their financial results. A context conducive to major alliance manoeuvres and mergers/acquisitions.