By Max Singh
“For the remainder of 2023 and 2024, the upturn in any global economic trend remains fragile, and risks are tilted to the downside. Uncertainty over the evolution of Russia’s war of aggression against Ukraine and its global impact remains a key concern.”
The world’s global economic outlook is less rosy than expected for the rest of 2023 and 2024. Several issues, the recovery from the COVID-19 pandemic, recovering supply chain issues, high inflation, continuing tensions with China and Russia, not to mention the war in Ukraine, are all factors. According to the Organization for Economic Cooperation and Development (OECD), an internationally recognized institution that tracks continuing global economic growth outlooks for 77 democratic economies, the one positive is that inflation in the OECD is projected to decline from 6.6% in 2023 to 4.3% in 2024.
OECD Secretary-General Mathias Cormann said, “Policymakers must get inflation durably down to target and unwind broad by better targeting fiscal measures. While continuing to respond to the immediate economic challenges, it remains important to prioritize structural reforms to boost productivity, including promoting competition, reviving investment, increasing female workforce participation, and alleviating supply constraints while securing the green and digital transformations of our economies.”
For the remainder of 2023 and going into 2024, according to the OECD, the upturn in any global economic trend remains fragile, and risks are tilted to the downside. Uncertainty over the evolution of Russia’s war of aggression against Ukraine and its global impact remains a key concern. The persistence of inflation is another critical downside risk. While The impact of higher interest rates (As in Canada) is increasingly being felt across the economy.
“Fiscal policy should prioritize productivity-enhancing public investments, including those driving the green transition and boosting labor supply and skills,” OECD Chief Economist Clare Lombardelli said. “Renewed reform efforts to reduce constraints in labor and product markets and to reignite private investment and productivity growth would improve sustainable living standards and strengthen the recovery from the current low growth outlook.”
“As we enter the final stages of the inflationary cycle that started in 2021, hope is not a policy, and the touchdown to a fully global economic recovery may prove quite tricky to execute. On all these issues, multilateral cooperation remains the best way to ensure a safe and prosperous economy for all.”
Canadas 2024 Economic Outlook
According to the OECD’s latest figures, Canada’s economy grew by 3.2% in 2022, surpassing the G20 and OECD averages of 3.0% and 2.8%, respectively. However, Canada still faces post-pandemic structural issues driven by inflationary pressure, weak investment, and tepid productivity growth. Furthermore, Canadian households face short-and medium-term economic challenges to keep up with the rising cost of living. As a result, Canada’s economic growth is projected to be 1.3% in 2023 and 1.5% in 2024. The Royal Bank of Canada (RBC) also forecasts a potential downturn in 2023 and 2024. Meanwhile, the Bank of Canada (BOC) says, “We expect economic growth to moderate and inflation to ease, but this will take longer than we forecast. This means the economy will move into modest excess supply in early 2024. The inflation CPI (Consumer PRICE Index) is forecast to remain at about 3% for the next year before declining gradually to the 2% target the Bank of Canada aims for in the middle of 2025.” The consensus among the BOC Governing Council was that monetary policy needed to be more restrictive to bring inflation back to the 2% target. Our forecast suggests inflation will be around 3% for the following year. We are concerned that the progress to price stability could stall, and inflation could rise again if upside surprises exist.
The Conference Board of Canada, a Canadian not-for-profit think tank dedicated to researching and analyzing economic trends, also expects further slowing to 2.4 percent in 2024. “Economic growth is moderating under still high inflation and monetary policy tightening. Rather than a global recession, we expect a subdued economic outlook.
Roads to Positive Global Economic Growth
The Conference Board says, however, there are country-specific deviations, such as a possible rebound in US GDP in 2025; Business would do well to prepare for a slowing global economic growth environment over the next decade. Growth is most robust in emerging Asian economies and weakest in Europe and the US.”
However, the board says there are opportunities: “Global growth will return to its slowing trajectory with mature markets making smaller contributions to global GDP over the next decade.” Keys to ensuring global growth over the longer term include developing new lines of business, strengthening corporate culture, embracing digital transformation and automation, recruiting talent with new skills, and maximizing the hybrid work model where it makes sense.
Pierre-Olivier Gourinchas from the International Monetary Fund says. “Hopefully, with inflation starting to recede, we have entered the final stage of the inflationary cycle that started in 2021. But hope is not a policy, and the touchdown may be tricky to execute. On all these issues, multilateral cooperation remains the best way to ensure a safe and prosperous economy for all.”
Sources -Statistics Canada. Organization for Economic Cooperation and Development. Bank of Canada. RBC Economic reports. Conference Board of Canada. Royal Bank of Canada. International Monetary Fund.
