'Cautious optimism': Here's what chief economists think about the state of the global economy

Despite geopolitical tensions and lingering economic headwinds, the outlook for the global economy is improving.

The May 2024 Chief Economists Outlook from the World Economic Forum found that just 17% of economists surveyed expect conditions to worsen this year, a significant improvement compared to the 56% recorded in January.

"Uncertainty persists, but signs of brightening are reflected in the latest survey," the report notes. "The developing economic mood is one of cautious optimism."

The Chief Economists Outlook, published three times a year, surveys leading chief economists from across industries and international organizations. The latest edition explores key trends in the global economy, including the latest outlook for growth and inflation, the implications of recent geopolitical and domestic political developments and prospects of reviving medium-term growth.

"Many of the global developments that have been highlighted as sources of heightened volatility and complexity in this and recent editions of the Chief Economists Outlook– including geopolitical rifts and technological transformation – have profound and far-reaching implications for the future pace and trajectory of the global economy," the report states.

While some of the sharpest near-term risks to the global economy may have eased, uncertainty remains high, and the chief economists highlighted a number of potentially disruptive factors.

Nearly all respondents (97%) expect international geopolitics to cause global economic volatility throughout 2024, up from 90% in September 2023.

Domestic politics has also emerged as a risk for the global economy. More than eight in 10 respondents (83%) said domestic politics will be a source of volatility in 2024 – a year when more than half the world's population is set to go to the polls.

Chief economists were more sanguine about the immediate impacts of advanced technologies such as artificial intelligence (AI). In fact, most chief economists (69%) disagree that AI will be a source of volatility in 2024.

The outlook for economic growth varies significantly by region, according to the chief economists.

There has been a notable uptick in optimism on the economic prospects of the United States. Nearly all the chief economists surveyed (97%) now expect moderate or stronger growth in the American economy in 2024, up from 59% in January.

Asia remains a source of optimism, too. All of the respondents expect at least moderate growth in South Asia and East Asia and the Pacific this year. In South Asia, in particular, growth prospects have improved significantly, with 70% expecting strong or very strong growth in the region this year, up from 52% in January.

The expectations for China are somewhat more muted, as weak consumption data and ongoing property market woes dampen the near-term outlook. About three-quarters of chief economists foresee moderate growth in China this year and only 4% predict strong growth in 2024.

The outlook is considerably more pessimistic for Europe, with almost seven in 10 expecting weak growth in 2024 and none of the respondents predicting strong or very strong growth.

For the rest of the world, the majority of chief economists expect moderate growth, with a slight improvement in expectations since January.

Inflation expectations vary across regions too, but the extent of this variation has begun to diminish, and the latest results reveal convergence towards a moderate outlook for inflation.

In the US, around two-thirds of chief economists expect moderate inflation to persist this year. The outlook is generally unchanged in Europe, where 57% of respondents expect moderate inflation and a quarter expect low inflation.

China remains an outlier in terms of the presence of deflationary risks. More than eight in 10 chief economists expect low or very low inflation this year, with the share of those predicting very low inflation almost doubling since January. Elsewhere, expectations of low inflation have also strengthened in East Asia and the Pacific (43%) and in Central Asia (32%), up by more than 10 percentage points since January.

The current global economic landscape makes for a tough decision-making environment for businesses and policymakers, according to the chief economists. Almost eight in ten expect heightened complexity to be a growing challenge for public and private sector leaders throughout 2024.

An even higher share of respondents said the same about tensions between politics and economics (86%), as increasing polarization and volatility in domestic politics become more prominent with the wave of elections this year.

Looking at the factors expected to drive corporate decision making this year, both economic and political factors feature prominently, as the graphic above illustrates. Notably, almost twice as many chief economists said companies’ growth targets will drive decision-making as those that think the same about companies’ environmental and social targets.

Encouragingly, the chief economists’ relative optimism about the outlook for economic growth stretches beyond the short term. At a time when many medium-term forecasts have been slashed—the International Monetary Fund (IMF) forecast of global growth of 3.1% five years from now is at its lowest in decades—the chief economists see the possibility of a sustained rebound in growth.

Almost seven in ten said they expect global growth to return to 4% within the next five years, and four in ten expect that within the next three years. That would mark a welcome improvement in the global economy, although it is worth noting that a minority of respondents (23%) do not share this optimism and said that they do not expect the global economy to return to 4% growth over any timeframe.

Looking at the potential drivers of growth over the next five years, the chief economists are unambiguous in expecting technological transformation, AI, and the green and energy transition to play a positive role, particularly in high-income economies. By contrast, there is a strong consensus that geopolitics, domestic politics, debt levels, climate change and social polarization are set to dampen growth in both high- and low-income economies.

Looking at what policy-makers can do to boost growth in the next five years, chief economists highlighted innovation, infrastructure development, education and skills development, and monetary policy as the most effective policy levers regardless of countries’ income levels. Policy action in a number of other areas – including institutions, social services and access to finance – are expected to be more beneficial for low-income than high-income economies. There is a notable lack of consensus among the chief economists on the likely growth impact of environmental and industrial policies.

The societal implications of many of these policy areas extends well beyond growth, to cover distinct goals and values related to issues such as sustainability and inequality. With this in mind, the latest Chief Economists Outlook concludes by noting that economic policy increasingly needs to "focus on the character or composition of economic activity" around the world.

"Responding to the growing challenges facing the world requires more than a simple increase in the rate of growth," the report states.