Picture Credit: Freepik.com
A majority of leading chief economists remain cautiously optimistic about the global economy’s recovery, with South Asia, particularly India, emerging as the standout performer, according to the World Economic Forum’s (WEF) latest “Chief Economists Outlook” report released on Wednesday.
Global Economy Faces Debt Pressures Amid Inflation Relief
The report highlights easing inflation and resilient global commerce as key drivers of cautious optimism, but growing debt levels in both advanced and developing economies are causing concern.
“Easing inflation and strong global commerce are fuelling cautious optimism for recovery, but elevated debt levels are becoming a growing concern in both advanced and developing economies,” the WEF noted.
A major issue highlighted is the mounting fiscal challenges that many economies are facing, with high debt levels threatening their ability to invest in critical sectors like infrastructure, education, and healthcare. This concern is particularly pronounced in developing countries, where nearly 40% of economists predict a rise in defaults over the next year.
Regional Outlook: Mixed Growth Projections Across the Globe
While the outlook varies across regions, nearly 90% of chief economists expect moderate or strong growth in the United States in 2024 and 2025, buoyed by optimism for a “soft landing” following a period of tight monetary policy. On the other hand, 80% of economists agree that the outcome of the upcoming U.S. elections could significantly shape global economic policies.
In contrast, Europe faces a less optimistic scenario, with three-quarters of respondents predicting weak growth for the remainder of 2024. Similarly, China’s economic struggles are expected to continue, with 40% of economists forecasting weak or very weak growth over the next two years.
India Leads South Asia as a Global Economic Bright Spot
India’s robust economic performance positions South Asia as the best-performing region globally. Over 70% of chief economists surveyed predict strong or very strong growth in South Asia for 2024 and 2025. “The strongest results in the latest survey are for parts of Asia. South Asia is a clear stand-out performer, with seven out of 10 chief economists expecting strong or very strong growth in 2024 and 2025,” the report stated.
The International Monetary Fund (IMF) recently revised India’s GDP growth forecast from 6.8% to 7%, reinforcing optimism around its economic outlook.
Fiscal Squeeze and Debt: Long-Term Threats to Stability
Despite the encouraging signs, the WEF report warns of a looming “fiscal squeeze” due to rising debt-servicing costs, which could limit governments’ capacity to invest in essential areas and threaten sustainable growth.
This challenge is especially severe in developing economies, where 82% of chief economists believe fiscal space is too constrained to handle future crises, compared to 59% in advanced economies.
“The global economy may be stabilizing, but fiscal challenges continue to pose significant risks,” said WEF Managing Director Saadia Zahidi. “Addressing these challenges requires coordinated efforts from policymakers and stakeholders to ensure that economic recovery is not undermined by these pressures. Now is the time for pragmatic solutions that can strengthen both fiscal resilience and long-term growth.”
The report underscores that the growing debt burden is not only a short-term risk but also a long-term obstacle to addressing global issues such as climate change, demographic shifts, and social cohesion.
