The Pudong New Area financial district. [Photo by Gao Erqiang/China Daily]
As 2023 draws to a close, the IMF in October expected the global economy to grow at a CAGR of 3.0 percent, significantly better than the pessimistic expectation for the end of 2022. Both advanced and emerging economies and developing countries (EMDEs) performed better than expected. According to the latest IMF forecast, China is expected to grow by over 5 percent in 2023. What can happen in 2024? Here we have 6 tips for you.
Lower or flat growth rate of the global economy
The global economic growth rate may slow in 2024, largely due to slowing domestic consumption growth in advanced economies. According to the IMF's latest global economic outlook, the forecast global growth rate falls to 2.9 percent. In 2023, consumption in advanced economies performed far better than expected, thanks to excess household savings, high employment rates, income growth and rising consumer spending post-pandemic, contributing a large share of economic growth. But these contributing factors have recently become weaker. Let's take the US as an example: As the US government raised its debt ceiling during the pandemic and sent checks directly to US households, US households have accumulated a historically high volume of personal savings, allowing them to raise more consume. However, according to the latest Fed data, excess savings have steadily declined throughout 2023 and are at 10 percent of disposable income by the second quarter of 2023. Additionally, slowing income growth and the U.S. workforce also poses obstacles for advanced economies.
EMDEs perform better than advanced economies
EMDEs will continue to outperform advanced economies in 2024. Nowadays, more and more EMDEs are investing in their domestic investments, focusing more on local economic development and people's livelihoods. According to the world's historical experience, a country's investment process can take several years or even decades, making it a long-term economic stimulus for EMDEs.
Inflation between crawling and walking
In 2022 and 2023 we saw runaway inflation worldwide. For example, the U.S. consumer price index of urban consumers recorded annual growth of over 6 percent, nearly 10 percent from October 2021 to January 2023, reaching a 20-year high since 1982. The situation began to improve in 2023 and may improve, as many countries continually increased their domestic interest rates to high levels. The US Federal Reserve's key interest rate is currently in a range of 5.25 to 5.5 percent, compared to the current 10-year breakeven inflation rate in the US, which is only around 2.2 percent.
China's better recovery demands from domestic households
China's fiscal balance was affected from 2020 to 2022 since the unpredictable pandemic began and commodity prices suddenly shot up during this period. The good news is that China's fiscal balance has gradually improved in 2022-2023, with the household savings-debt ratio rising from a low of 1.47 to 1.70 in November 2023, unlocking more household consumption potential in 2024 . The latest data also shows that China's domestic consumption is recovering quickly. In November 2023, China's total retail sales of consumer goods reached 4.25 trillion yuan, up 10.1 year-on-year, up 2.5 percentage points month-on-month, and amounted to 42.8 trillion yuan in January-November, up 1 7.2 percent compared to the previous year.
China's investments remain stable
In 2023, China's manufacturing and infrastructure investments performed well. In the first eleven months, manufacturing investment increased 6.3 percent and infrastructure investment increased 5.8 percent year-on-year. Although real estate investment registers a negative growth rate of 9.5 percent due to the recently optimized real estate policy, China's real estate industry is expected to be nearing its bottom and the industry will experience higher quality development in 2024, after a two-year decline in 2022-2023. In summary, China's investment will remain stable or improve slightly in the coming year 2024.
China's high-tech exports are becoming increasingly popular around the world
China's exports will remain strong in 2024. Over the past two decades, China's major goods exports have changed dramatically, from the former labor and resource-intensive producers to highly skilled and technology-intensive producers. China is expected to become the world's largest auto exporter in 2023, with over 5 million cars sold by the end of 2023, an annual growth of 60 percent. Today, electric cars, solar cells and Li-ion batteries are considered China's “new three” exports compared to the previous garments, household appliances and furniture. China's export improvement can benefit both China and the world. Note that China's export growth is an outcome, not a goal. As Chinese Foreign Ministry spokesman Wang Wenbin once said, China is not intentionally pursuing a trade surplus. China is committed to increasing its import by expanding duty-free import product categories, holding various import fairs and activities, etc.
In summary, the global economy may be more stable in 2024 compared to the huge ups and downs in 2020-2022. China's economy will continue to steadily improve, providing greater reliability and opportunities to the entire world.
The author is an associate researcher at the Chongyang Institute for Financial Studies, Renmin University of China (RDCY).
The opinions expressed here are those of the author and do not necessarily reflect the views of China Daily and the China Daily website.
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