2024 risk outlook

THERE is a moderate risk that inflation will reaccelerate in 2024.

It will be driven by firm global demand as labour markets remain tight and workers retain bargaining power and an upswing in key commodity prices due to supply shortages.

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This could push central banks to keep tightening well into next year, raising interest rates to levels that will likely lead to a much more significant slump in consumer and investment demand.

Wages have not risen as quickly as inflation in most countries. This makes it harder for poorer households to purchase basic staples, Economist Intelligence says in its recent report “Risk Outlook 2024”.

It cites 10 critical risk scenarios facing the global economy next year, exploring how trade disputes, the advent of new technologies and persistent environmental threats can upset business operations in 2024.

It expects stable, but unspectacular, global growth to continue into 2024.

Geopolitical tensions and the advent of new technologies and persistent environmental threats can upset the outlook for 2024.

Artificial intelligence (AI) will augment rather than replace human capabilities, presenting an opportunity for firms to improve productivity.

The widespread adoption of AI and its use on social media will raise the risk of a spread in disinformation campaigns via text, imagery, audio and video in the coming years, it adds.

In emerging markets, higher than expected interest rates can also cause extreme currency depreciations, further increasing inflation and weighing on growth, it says.

In major developed countries, the reduction of central banks’ balance sheets can result in a sharp sell-off in the sovereign bond market and increase risk premiums in 2024, especially in highly indebted European economies.

This can lead to a widespread asset-price crash, prompting a global recession, it adds.