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In economic terms, 2023 had a few surprises in store, both��positive and negative. In the US, the predicted recession��never arrived as the economy proved to be surprisingly��resilient in the face of rapidly rising interest rates.��Consumers remained keen to spend, thanks to a robust��labor market and pandemic-era savings (now used up).��Fixed-rate mortgages shielded many households from��rising rates (for now).

In China, on the contrary, the expected recovery following��the reopening of the economy turned out to be surprisingly��short-lived; structural weaknesses – above all, the��precarious situation of the real estate market – quickly��regained the upper hand and dampened sentiment. The��other major economy that disappointed in 2023 was��Germany – although this did not really come as a surprise.��It was foreseeable that the industry-heavy German��economy would not recover so quickly from the energy��price shock. The rest of Europe, on the other hand, fared��much better thanks to stronger service sectors.

From today’s perspective, there is much to suggest that the��signs are reversing, says Ludovic Subran, Chief Economist��at �ǿմ�ý. The US will weaken (possibly even slide into��recession), while China should pick up again. In China’s��favor is the fact that the central government has finally��given up its restraint and is supporting the economy,��especially the real estate market, more resolutely. And for��the US, the old adage applies: postponed is not canceled.��Higher interest rates eventually have a negative impact��on demand and thus bring the economy to its knees, even��if it took a little longer this time due to the special post-Covid circumstances.

�ǿմ�ý Research expects only around 1% growth for the��US in 2024, but 5% in China. And Europe? Here, too, growth��will (further) slow due to higher interest rates. In Germany,��the budget crisis puts the expected cyclical recovery in��jeopardy. Therefore, growth in the major economies will��remain well below 1%. Global growth is also likely to��weaken: at a tad over 2%, it will undershoot the long-term��average significantly.

“But this lackluster growth is a necessary evil: high��inflation rates will finally be a thing of the past,” says��Subran. “This will give central banks some room to��maneuver – lower interest rates are likely in the second��half of the year. Not a second too late, as stimulus cannot��be expected from fiscal policy. After the excesses during��the pandemic and the energy crisis, the threatening rise in��debt is forcing consolidation almost everywhere.”

So, 2024 could become a year of transition, in which the��wild ups and downs of growth, inflation and interest rates��experienced since the Covid-19 shock settle down and��pivot to more usual levels.

“A nice consolation. But completely uncertain. Because��what really stands out in 2024 is the large number of��elections and their potential for new upheavals,” says��Subran. “First and foremost, of course, is the US election��– which could end with a possible return of Donald Trump��to the White House. Trump II is likely to be more disruptive��than Trump I, for one simple reason: eight years later, the��world is a different place, fragmented and torn apart by a��multitude of conflicts and wars. An isolationist America is��always bad news for the rest of the world (at least for the��free one), but in times like these the risks are even greater��than usual.”