The global economy will perform better than many expect in 2024

Goldman Sachs Research expects the global economy to outperform expectations in 2024 — just as it did in 2023.

That outlook is based on our economists’ prediction for strong income growth (amid cooling inflation and a robust job market), their expectation that rate hikes have already delivered their biggest hits to GDP growth, and their view that manufacturing will recover. Central banks, meanwhile, will have room to reduce interest rates if they’re concerned about the economy slowing. “This is an important insurance policy against a recession,” Goldman Sachs Research Chief Economist Jan Hatzius writes in the team’s report titled Macro Outlook 2024: The Hard Part Is Over.

Worldwide GDP is forecast to expand 2.6% next year on an annual average basis, compared with the 2.1% consensus forecast of economists surveyed by Bloomberg. In fact, Goldman Sachs Research’s forecasts for GDP growth in 2024 are more optimistic than the consensus for eight of the world’s nine largest economies, as of Nov. 8, 2023. And notably, our economists expect US growth to outpace its developed market peers again.

The global economy fared better than many economists expected in 2023

Goldman Sachs Research was also optimistic about the global economy in 2023 — and the results have exceeded even our own economists’ expectations.

Solid GDP growth has translated into more-than-solid labor market performance. The unemployment rate across all the economies covered by our analysts (and with high-quality labor market data) now stands about 0.5 percentage points below its pre-pandemic level. Importantly, this improvement is visible even in some key economies that have seen very low real GDP growth, such as the Euro area.

Will inflation continue to cool in 2024?

Importantly, GDP growth and employment have been surprisingly buoyant among economies that experienced a large and unwanted inflation surge in 2021-2022. (Policymakers in Japan, by contrast, wanted inflation.) And inflation is now cooling across G10 and emerging market economies.

https://www.goldmansachs.com/intelligence/pages/the-global-economy-will-perform-better-than-many-expect-in-2024.html