Despite strong signals of improving economic conditions, a major global organization of accounting professionals is not overly optimistic about prospects for the worldwide economy this year.
The title the Association of Chartered Certified Accountants chose for its new report on the topic tells much of the story: “2024 Global Economic Outlook: Slow Growth, High Uncertainty.”
The report cites World Bank forecasts that global GDP growth will be a reasonably healthy 2.9% this year. However, the World Bank expects that most of that growth will be driven by emerging economies. Growth will top out at 1.5% in the United States, 0.7% in Europe, and 1.2% cumulatively in a group of countries the bank identifies as having “advanced economies.”
On a country-by-country level, the most optimistic forecasts for 2024 economic growth are in an array of widely diverse countries, both geographically and economically.
“Overall, the global economy looks set to grow slowly once again in 2024, and the risks are skewed to the downside,” said Jonathan Ashworth, the ACCA’s chief economist. “The lagged impact of past monetary tightening could lead to an even more pronounced slowing in growth, and geopolitical risks remain very heightened.”
Ashworth declared that “it could be risky for central banks to declare imminent victory in their battles against inflation.”
On the plus side, he opined that a significant potential upside for the global economy “could perhaps come from continued rapid improvements on the inflation front, which could pave the way for quite an early and significant easing of monetary policy by central banks.”
Still, that would risk sowing the seeds of higher inflation in 2025 and beyond, Ashworth observed. Additionally, financial markets have already priced in the multiple interest rate cuts they expect from the Federal Reserve this year, the ACCA’s report noted.
The report presented interviews with seven CFOs in Asia, Europe, and Africa, six of whom were in a range between cautiously optimistic and flat-out pessimistic in their expectations for the global economy this year. Only one, identified as a China-based finance chief of a U.S.-based company, was generally positive about prospects for 2024.
3 Trends to Watch in 2024
The report noted three key trends that could heavily impact economies and businesses this year, which the accountancy organization will closely watch.
1. Backsliding by Governments on Policies Intended to Achieve “Green Transition”
Several countries, including the U.K., Germany, and New Zealand, dialed back on green transition policies last year. “Given the busy political calendar this year, there is clearly a significant risk of further backsliding by governments, which could delay the transition and increase uncertainty among firms,” the report stated.
A majority of accounting and finance professionals seemingly don’t foresee such backsliding, however. In a fourth-quarter survey by the ACCA, 41% of respondents said they expected governments to strengthen such policies this year, compared with just 13% who anticipated the policies to be weakened.
2. Rising Geoeconomic Fragmentation
The rapid pace of globalization ended with the global financial crisis of 2008-09. Now, according to the report, the world increasingly faces geoeconomic fragmentation, “which encompasses reversals along any and all of the different channels whereby countries engage with each other economically.”
Such channels include trade, capital flows, workers' movements across national boundaries, international payments, and multilateral cooperation to provide global public goods.
“Global trade relations deteriorated significantly with the advent of the Trump administration and the trade war with China, as well as restrictive U.S. measures against other countries,” the report noted. It added that the Biden administration has largely continued the Trump-era trade policies and has banned the export of key technological products to China.
3. Developments With Artificial Intelligence
What forward-looking report today would fail to highlight the implications of AI technologies?
Regardless of the obvious, enormous economic and societal potential of AI applications, the path forward is unlikely to be smooth.
“AI is likely to serve as a catalyst for innovation in the business world if opportunities are recognized and training is prioritized,” the report said. “But there will be gaps in adoption. Many organizations suffer from poor-quality data or related infrastructure that must first be brought up to date before they can leverage the benefits of AI.”
The report also opined that AI is unlikely to displace significant numbers of jobs in the accountancy profession.