It is perhaps the one fact that economists have no doubt about, but also no control over: in 2024, the number-one risk to the economy will be... geopolitics. The aftermath of Russia's war in Ukraine, the possible extension of the conflict between Israel and Hamas and the potential continuation of unrest in the Red Sea will weigh heavily in the economic equation. To this list must also be added the series of major elections that will give the year its tempo. "The packed election calendar in 2024 will add to economic uncertainty as countries that account for 60% of global GDP head to the polls," noted the economists at Allianz Trade.
The European elections in June are already preoccupying Europe. There will also be legislative elections in India and the UK. But above all, two presidential elections could have decisive consequences for the rest of the world: Taiwan's in January, and then, above all, the United States' in November. "These political uncertainties could freeze households and businesses into a wait-and-see attitude, which may result in a year without momentum," said Ludovic Subran, Allianz's Chief Economist. What's more, new political shifts, such as the one indicated by the arrival of the populist Javier Milei in Argentina in December, cannot be ruled out in certain countries.
Is recession still lurking in the wings?
At the beginning of 2023, many economists believed that, with the Federal Reserve (Fed) raising interest rates and thus the cost of credit, recession was inevitable in the US. They were wrong: the US economy has held up astonishingly well, thanks in particular to a strong performance by the labor market and massive budgetary support from the Biden administration. "Over the next few months, the country should experience a soft landing," said Gilles Moëc, AXA's Group Chief Economist. According to the International Monetary Fund (IMF), the American gross domestic product (GDP) should in fact grow by 1.5% in 2024, after growing 2.1% in 2023.
The picture is a little less rosy on this side of the Atlantic. The Eurozone is expected to grow by 0.3% to 0.8%, according to various institutes – 0.6% to 0.8% for France, and little more than 0.6% for Germany. "The question of the year will be whether or not Europe will escape recession," said Subran. Many member states are expected to limit their public spending to comply with European budgetary rules, which will negatively affect activity. "They may also put the brakes on investment in the green industry, which is vital to our economy, and make us lag even further behind the United States in this area," pointed out Philippe Waechter, the head of the economic research department at Ostrum Asset Management.
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