Global economy in 2024: China, Trump and the next black swan

The 2020s has been a bumpy decade so far for the global economy.

On December 31, 2019 — the literal eve of the decade — the World Health Organization was notified about a concerning cluster of mysterious pneumonia cases in China. By March, the COVID-19 pandemic had locked up the world and would take a sledgehammer to global economic growth over the next two years.

Just when the world had emerged from that crisis, a new catastrophe unfolded with Russia's invasion of Ukraine in February 2022. Oil prices surged, fueling inflation. Supply chains, already upended by the pandemic, were thrown into further disarray. Europe dramatically stopped most trading with its biggest energy partner.

And there have also been some significant subplots: the cryptocurrency crash, the working-from-home revolution and the ever-more noticeable presence of artificial intelligence (AI) in everyday working lives. It's been a wild ride, to put it mildly.

So as the decade trundles onward into 2024, is the global economy heading for some much-needed respite and stability? Don't bet on it.

The big economic picture

The dramatic events of the past few years have left a considerable economic legacy.

Although inflation has slowed significantly in the world's advanced economies, interest rates remain high. There is no certainty as to when they may fall, with central bankers reluctant to move too soon amid doubts over whether inflation has really been tamed.

Some experts believe the effects of the tightening of monetary policy will begin to be felt in 2024, having not had the impact in 2023 many thought likely.

"The global economy hasn't weakened by as much as we might have thought it would have done, given all the shocks we've seen," Adam Slater, lead economist for Oxford Economics, told DW. "But we do think that some of that is just a question of time."

Slater expects global growth to be considerably "weaker" in 2024, and hasn't ruled out technical recessions.

There is an expectation that global GDP growth will not be hugely different in 2024 compared with 2023, but many predict a slowdown.

The Organization for Economic Cooperation and Development expects global growth of 2.7% this year, down from 2.9% in 2023. The International Monetary Fund expects 2.9% growth, while the European Central Bank has forecast a rate of 3%.

Within that, there's plenty of regional variance. For example, the IMF expects much stronger growth in the US than in China or Europe.

Keeping an eye on China

Indeed, China's cooling economy is something to watch closely in 2024, given how critical the world's second-largest economy is to the globe as a whole.

"It's important for global growth and it's important regionally in Asia for the dynamism of that economy," said Slater of Oxford Economics.

Sushant Singh, from India's Centre for Policy Research, said whether China's economy "revives or sinks" is a critical question for 2024.

Earlier this year, the World Bank warned that China's economic malaise would weigh heavily on East Asia as a whole, traditionally one of the world's great economic engines.

However, William Reinsch from the Center for Strategic and International Studies in Washington, is more optimistic about China's prospects.

"One of the characteristics of state-controlled economies that's interesting is their ability to postpone the consequences of their mistakes," he told DW.

"They will tell banks: lend to this sector. They will tell companies you can't go broke, or they'll tell companies you need to go broke, if they want to send a signal. But it's the government calling the shots."

Reinsch thinks predictions of a Chinese economic implosion are wide of the mark, even while acknowledging the serious economic concerns there.

"They've got some very strong export sectors, beginning with EV [electric vehicles] batteries, a whole bunch of consumer electronic categories, minerals," he said. "I mean, they've got big chunks of their economy where they're highly competitive globally, and that's not going to change."

However, one area he is concerned about is Taiwan. Although the recent meeting between Xi Jinping and Joe Biden suggested some kind of thaw in US-China relations, the prospect of a Chinese invasion of Taiwan hangs over the global economy like few other possible events.

Although an invasion remains unlikely — and an invasion in 2024 would be a shock of mammoth proportions — Reinsch said it's something that genuinely worries him.

"Xi is thinking legacy, and one of the things he wants to do is put the last piece into the puzzle," he said.

Ukraine, food and fuel

While a conflict in Taiwan is perhaps something for the future, the war in Ukraine is likely to remain a significant influence on the global economy in 2024.

For Sushant Singh, it's still the most important variable. "Definitely the Russia-Ukraine war because it directly affects three things: food, fertilizer and fuel," he said. "So those three things affect the largest number of people, particularly in the Global South."

The war has had a profound impact on global energy and food markets for the past two years, with the world's poorest worst affected.

"If in some ways that situation is stabilized or resolved, a large number of people in the Global South would benefit in terms of number of people," he added.

Singh said there is a more general issue with how economic forecasts tend to focus on richer countries, without focusing enough on developing economies and the serious issues there, which in many ways have gotten worse since the pandemic.

He highlighted India as an example where high growth rates mask the reality of life for the vast majority. The Indian government recently announced it would provide free grain to more than 800 million people in the country.

"If the future was so bright, we would not be looking at two-thirds of the country being promised free food rations for the next five years by Mr. Modi," he said.

Election fever around the world

India is one of several countries that will hold decisive elections next year.

In fact, 2024 is the biggest election year in history. More than half the world's population of 8.1 billion lives in a country set to go to the polls around the world. Brazil, Pakistan, Indonesia, Turkey, Mexico, Bangladesh and potentially the United Kingdom are among other countries set to hold important votes.

Many of these countries have global economic significance but it's hard to look past the 2024 US presidential election as the most decisive of all. Donald Trump is currently leading President Joe Biden in polls and could well be elected next November for what would be a historic second term.

Given how Trump courted a trade war with China during his last presidency, there is considerable unease around what a second Trump term would mean for the global economy.

"It would be a huge shock because he's already talking about across-the-board tariffs and a variety of fairly earthshaking things," said Reinsch. "You can be quite confident that the rest of the world will overreact, or certainly react."

If Trump does win, he would not take office until 2025.

There's a wide range of other factors and possible events that business leaders and economists have trained their sights on for 2024. The green transition in multiple sectors and the rapid pace of development within AI are likely to become more central to business discussions.

But, as events such as the pandemic and the war in Ukraine showed us, it's often the unexpected, unforeseeable things that have the biggest impact.

"What I worry about more is events like the 'black swans,' events that are not predictable, that lead to cataclysmic reactions," said Reinsch.

Don't be surprised if there are more surprises.

Edited by: Tim Rooks