Global economy to do better than expectation in 2024: Goldman Sachs

The economists forecast this year’s decline in inflation to continue in 2024: sequential core inflation is predicted to fall from 3 per cent now to an average 2-2.5 per cent range across the G10 (excluding Japan).

The global economy is likely to outperform expectations next year, just as it did this year, as Goldman Sachs Research economists predict strong income growth amid cooling inflation and a robust job market. This year’s decline in inflation is projected to continue next year.
Global GDP is forecast to expand 2.6 per cent next year on an annual average basis.

They expect that rate hikes have already delivered their biggest hits to gross domestic product (GDP) growth and feel manufacturing will recover.

Central banks, meanwhile, will have room to reduce interest rates if they are concerned about the economy slowing. “This is an important insurance policy against a recession,” Goldman Sachs Research chief economist Jan Hatzius wrote in a report titled ‘Macro Outlook 2024: The Hard Part is Over’.

Global GDP is forecast to expand 2.6 per cent next year on an annual average basis.  The economists expect US growth to outpace its developed market peers again, Goldman Sachs Research said in an article on its website.

Goldman Sachs Research was also optimistic about the global economy in 2023, and the results exceeded its economists’ expectations.

GDP growth and employment have been surprisingly buoyant among economies that experienced a large and unwanted inflation surge in 2021 and 2022. And inflation is now cooling across G10 and emerging market economies.

“We don’t think the last mile of disinflation will be particularly hard,” Hatzius wrote. The supply and demand of goods have grown more balanced, and the impact of this on core goods disinflation is still unfolding and is forecast to continue through most of 2024. Shelter inflation is expected to have considerably further to fall.

Over the past year, the economists have been relatively optimistic that major economies can avoid a recession. In the report, they reaffirm their long-standing view that the probability of a US recession is much lower than commonly appreciated—at just 15 per cent over the next 12 months.

The ‘most novel reason’ to be optimistic about GDP growth is that central banks don’t need a recession to bring inflation down, and will therefore try hard to avoid one, Hatzius added.

Fibre2Fashion News Desk (DS)