UN economic forecast cites conflicts, sluggish trade, high interest rates and climate catastrophes

UNITED NATIONS – The United Nations issued a grim global economic forecast for 2024 on Thursday, pointing to challenges from escalating conflict, sluggish global trade, persistently high interest rates and increasing climate disasters.

In its flagship economic report, the United Nations forecast global economic growth would slow to 2.4% this year from an estimated 2.7% in 2023, beating expectations. But both are still below the 3% growth rate before the COVID-19 pandemic began in 2020, it said.

The UN forecast is lower than those made by the International Monetary Fund in October and the Organization for Economic Co-operation and Development in late November.

The IMF said it expects global growth to slow to 2.9% in 2024 from an expected 3% in 2023. The Paris-based OECD, which includes 38 mainly developed countries, estimated that international growth would also slow to 2.7% in 2024, from an expected 2.9% in 2023.

The UN report, World Economic Situation and Prospects 2024, warned that the prospect of continued tighter credit conditions and higher borrowing costs represent “strong headwinds” for a global economy that is suffering from debt, particularly in poorer developing countries, and needs investment to revive growth.

Shantanu Mukherjee, director of the United Nations Department of Economic Analysis and Policy, said fears of a recession in 2023 had been averted largely because the United States, the world's largest economy, had curbed high inflation, excluding the economy to break.

But he said at a press conference to launch the report: “We are still not out of the danger zone.”

Mukherjee said this is because the unsettled situation in the world could fuel inflation. For example, another shock in the supply chain or a problem in fuel availability or distribution could trigger another rate hike to bring the situation under control, he said.

“We are not expecting a recession per se, but as the environment around us is volatile, this is the biggest source of risk,” he said.

Very high interest rates over a long period of time and the threat of possible price shocks contribute to a “pretty difficult balancing act,” Mukherjee said. “That’s why we said we’re not out of the woods yet.”

According to the report, global inflation, which was 8.1% in 2022, is expected to have declined to 5.7% in 2023 and is expected to decline further to 3.9% in 2023.

But annual inflation is expected to exceed 10% this year in about a quarter of all developing countries, it said.

While the U.S. economy performed “remarkably well” in 2023, the report said growth is expected to decline from an estimated 2.5% in 2023 to 1.4% this year.

“With declining household savings, high interest rates and a gradually weakening labor market, consumer spending is expected to weaken in 2024 and investment is expected to remain sluggish,” the UN said. “While the likelihood of a hard landing has decreased significantly, the U.S. economy will face significant downside risks due to deteriorating labor, housing and financial markets.”

With elevated inflation and high interest rates, Europe faces a “challenging economic outlook,” the report said.

GDP in the European Union is forecast to grow from 0.5% in 2023 to 1.2% in 2024, with the increase driven by “a pick-up in consumer spending as price pressures ease, real wages rise and the labor markets remain robust.” .”

In Japan, the world's fourth-largest economy, economic growth is expected to slow from 1.7% in 2023 to 1.2% this year despite the country's monetary and fiscal policies, the report said: “Rising inflation could signal an end to the ongoing deflationary trend for more than two decades” in the country, it said.

In China, the world's second-largest economy, the recovery from COVID lockdowns has been slower than expected “given domestic and international headwinds,” according to the United Nations.

With economic growth of just 3.0% in 2022, China turned the corner in the second half of 2023 with a growth rate of 5.3%, the report said. However, it says the combination of a weak real estate sector and weakening external demand for its products will “moderately depress growth to 4.7% in 2024.”

In developing regions, economic growth in Africa is expected to remain weak, increasing slightly from an average of 3.3% in 2023 to 3.5% in 2024, according to the UN.

“The unfolding climate crisis and extreme weather events will impact agricultural production and tourism, while geopolitical instability will continue to have a negative impact on several sub-regions…particularly the Sahel and North Africa,” the report said.

The United Nations forecasts East Asian economies will experience a moderate slowdown from 4.9% in 2023 to 4.6% in 2024. In West Asia, GDP is expected to grow 2.9% in 2024, down from 1.7% in 2024 Year 2023.