Economists forecast global economic slowdown, but remain optimistic about India

Most economists anticipate a slowdown in the global economy in the coming year due to political and financial instability, a recent survey by the World Economic Forum has found. However, over 90 per cent of economists are optimistic about the prospects of moderate to strong growth in South Asia, particularly in India. Meanwhile, the economic outlook for China has dimmed, marked by signs of deflationary pressures and vulnerability in the country's real estate market, according to the World Economic Forum's latest report titled 'Chief Economists Outlook'.

Amid the ongoing challenges of political and financial instability worldwide, nearly six in 10 economists believe that the global economic situation will hinder progress towards achieving the United Nations Sustainable Development Goals (SDGs). Additionally, 74 per cent of respondents believe that geopolitical tensions will have a similar detrimental effect.

Economic outlook concerns

As world leaders gather in New York for the UN high-level week to discuss the advancement of the SDGs, the WEF report reveals that more than 60 per cent of chief economists expect a weakening global economy in the near future, driven by uncertainties in domestic and international politics and turbulent financial markets.

While the majority (86 per cent) of economists foresee a decline in the recent surge of global inflation, the prolonged tightening of financial conditions is expected to leave lasting repercussions, including reduced access to business lending, increased corporate debt defaults, and potential corrections in property and equity markets.

Developing countries are poised to experience the most pronounced impact from these global headwinds. Chief economists caution that geopolitical tensions (74 per cent) and tighter financial conditions (59 per cent) could undermine progress towards global development goals, as outlined by the WEF.

"This is particularly concerning given the decelerating progress in various SDG areas, including food security, climate action, and biodiversity protection. At the current pace, more than half a billion people are projected to remain in extreme poverty by 2030," the report adds.

Capital flow optimism

A minority of chief economists anticipate increased cooperation (41 per cent) and greater private capital flows (30 per cent) between advanced and developing countries over the next three years. However, economists express particular optimism regarding the potential positive impact of unlocked private capital flows in specific development areas, including digital transformation (97 per cent), energy access and affordability (76 per cent), food systems and nutrition (67 per cent), as well as addressing climate change, biodiversity loss, and pollution (67 per cent).

Saadia Zahidi, MD, WEF, stated, "The latest Chief Economists Outlook highlights the continued fragility of the global economy. It also underscores the pressing challenges and trade-offs faced by developing nations, emphasising the need for innovation, cross-border investment, and technology transfer to align growth, climate action, and human development."

Regional economic perspectives

Economic prospects for 2023-24 vary across regions. While economists are most optimistic about growth in Asia, the outlook for China has deteriorated since the May 2023 survey due to deflationary pressures and instability in the real estate market. Over 90 per cent of respondents expect moderate or strong growth this year in South Asia, notably in India, with a notable increase in the share of respondents anticipating robust growth in the region, rising from 36 per cent to 52 per cent.

In the United States, the economic outlook has improved since May, with eight in 10 economists now expecting moderate or strong growth in both 2023 and 2024. In Europe, 77 per cent anticipate weak or very weak growth this year, but there is growing optimism for 2024, with expectations of moderate or strong growth increasing from 23 per cent to 60 per cent.

The Chief Economist Outlook is built upon the latest policy research and consultations with leading chief economists from both the public and private sectors, organised by the WEF's Centre for the New Economy and Society.