After the convulsions of the pandemic and the invasion of Ukraine, 2024 has a somewhat more conventional appearance, but it arrives loaded with unknowns. High interest rates, growing international tension and technological change are destined to set the economic pace, allowing for unforeseen events.
For next year, analysts do not expect interest rate increases in the euro zone beyond 4.5%. The German firm DWS even forecasts declines, although other analysts expect inflation still well above the 2% targets. This is what they call “sticky inflation,” which refuses to recede and could be exacerbated by energy. In the US, the Fed has hinted that rates could remain around 5.5%.
The mandate of the current European Commission will end at the end of October and, with it, that of Ursula von der Leyen, who has not announced whether she will run for re-election. The European Parliament will also be renewed after the June elections, where the weight of the forces opposed to the union will once again be measured. The great relief has arrived in institutions that have had to deal with the pandemic and, above all, with the Russian invasion of Ukraine. His last economic legacy should be an agreement on fiscal rules.
Barclays chief market analyst Julien Lafargue calls it “the most anticipated recession in history.” It did not arrive in 2023, but perhaps it will in 2024. Except for China, he assures, the main world economies have proven more resilient than expected, in part due to good employment performance and business results. The recession now depends on consumption and can have effects on house prices.
The US public deficit was 7% in 2023, according to analysts it will be around 5.7% in 2024 and will rebound to 6.2% in 2025. The debt grows and that has a cost in times of interest rate increases. The country finances itself 200 basis points above Germany. “Uncle Sam has a big bill to pay,” say M analysts.
The ecological transition is an unstoppable process with direct effects on sectors such as energy and automotive. The International Energy Agency (IEA) predicts that 107,000 megawatts (MW) of renewables will be installed worldwide this year. It will be the largest increase of all time, up to 440,000 MW. Meanwhile, the electric car will continue to gain market share in large economies.
Economists do not show enthusiasm when they observe the situation in China, despite its definitive consolidation as a counterweight to the US on a global level. “Its real estate crisis continues to be a risk for the entire economy,” Fitch says in a report. Chinese brick is affecting domestic demand and investment, two factors of growing importance in the country. The authorities are dedicating efforts to tackle uncertainty in the real estate sector.
Latin America has an opportunity with nearshoring, that is, bringing production closer to the US to reduce its dependence on China. Among them, Mexico is the big winner, with important opportunities in the industrial field. A PwC survey among managers in the country shows that, despite the difficulties, there is great optimism when they are told about the potential to become the great local supplier in the United States.
The year will be marked by the elections in the US and, although the candidates are not yet known, everything indicates that the contest between Joe Biden and Donald Trump will be repeated, this time with the former poorly placed in the polls. There will also be high-voltage geostrategic elections in the United Kingdom, India, Taiwan and South Korea, as well as in Russia, where the first presidential elections will be held since the invasion of Ukraine. If Putin runs, there is no doubt who will win.
The war in Ukraine is about to turn two years old and, despite the stabilization of the front, it continues to exert pressure and inject uncertainty into energy and food prices. The conflict seems destined for some coup d'état or the beginning of the expected talks between the sides. Meanwhile, war tension is growing, with new incendiary sources in the world, among them Israel and Hamas, and Taiwan, where there is the greatest risk of a clash between the US and China.
Generative artificial intelligence has become the great technological frontier, with apocalyptic messages included about its dangers for humanity. Fitch foresees rapid deployment of increasingly sophisticated artificial intelligence consumer interfaces and language models. At the business level, he warns, it can cause the rapid displacement of technology companies relegated by the impetus of new technology.
