While the macroeconomic picture continues to be extremely challenging for businesses around the world, there have been some signs of light at the end of the tunnel as we enter 2024.
In our latest Global Economic Outlook, members from Criticaleye’s Community assess prospects for growth, while also highlighting key areas of concern and risk in a year that will likely deliver ongoing geopolitical tension, electoral uncertainty and further technological disruption.
This is what they have to say:
Jok Tin Tan, Board Member and Independent Director, SuSing Asset Management Limited and Board Mentor, Criticaleye
Investment in green technology will drive growth in the Asia region, although regional tensions remain a risk
Asia is expected to remain the engine of global growth, with the ADB [Asia Development Bank] forecasting 4.8 percent for the region in 2024. This is despite a slowdown in China, with its growth projected at 5 percent for 2023 and 4.5 percent in 2024. The strongest growth is expected in markets like India, Indonesia, Malaysia and the Philippines, driven by strong domestic demand.
Three long-term developmental themes will increasingly intermesh and play out in the decades ahead: climate change; ageing societies; and revolutionary technologies. Climate change / crisis will force the increasing redirection of investments – public and private – towards sustainable infrastructures, innovative technologies and mitigation. With the world’s second largest economy, China, and third largest economy, Japan – as well as other economies in Asia – ageing rapidly, sectors ranging from healthcare, housing, transport and the food sectors will need to transition towards this new reality.
Geopolitical tensions, such as those between China-Taiwan and the US, could have significant impact on businesses, as these could disrupt supply chains, increase trade barriers and create market volatility. Businesses need to develop contingency plans, which include diversifying supply chains, expanding into new markets and building resilience. Companies should also monitor the evolving regulatory environment as governments [are] likely [to] introduce new regulations relating to data security, carbon emissions, technology and trade.
Europe might not be paying enough attention to the growing rivalry between India and China. This rivalry could have a significant impact on regional trade and investment. The rise of Southeast Asia should also be closely watched. This region is expected to become a major economic powerhouse in the coming years, which could offer tremendous opportunities for businesses.
The challenges of inflation, business consolidation and uncertainty in the Middle East all loom large over 2024
It remains a tight environment in the UK and globally. We were in Singapore recently for our Asia Leadership Retreat and most of the conversation was around a difficult economic landscape, led in that region by China's deterioration from a growth perspective. The issue is that growth needs to be above inflation, and I don't think it will be this year, sadly.
The US is an outlier to that story as it continues to grow relatively fast. The big question is whether that will continue in an election year, where historically the economy hasn't done well because people don't know which direction to invest in, depending on who gets in power. The general consensus, though, is that the US is a big market that can ride through things. Of course, the other big area that is consistently talked about as a potential dampener on growth in the US and globally is the situation in the Middle East, which again is creating a degree of nervousness that makes people more risk focussed.
You will see greater consolidation of certain businesses, which is typical of any downturn in the economic cycle because you need to reduce costs. So, I think all indicators are pointing towards accelerated M&A volumes next year, on both private equity and listed markets, which is supported across all of our research. There's still a general view that listed companies are undervalued, so I think you will continue to see companies coming off the markets and into private ownership. What we can't see yet is visibility on valuations. That's a bit more murky. Generally, we’re seeing a bit of a discount at the moment.
Whether that will hold into the New Year, or prices come back faster, is more difficult to read.
Sustainability, workplace issues and the shaky economic landscape will be major focus areas for Boards
I was recently asked to sum up my outlook for 2024 and, in a word, I said: ‘Unpredictable.’ I still hold that to be the case.
No matter what type of organisation they oversee, Boards have realised over the past decade or so that everything today is more intertwined. Thus, Board directors have a double responsibility to look both inward and outward at operations, such as how their organisation contributes to reducing its own [carbon] footprint internally. [It also needs to be outward facing], so … how it can contribute to the global good within [its] means. I am a big supporter of the United Nations SDGs [Sustainable Development Goals], and I think all organisations can use those as a guide, not just to help them on things they can do on climate change, but other issues connected to improving the lives of others, their workers and the planet.
Boards have stepped up their focus … on workplace issues … which will be with us for some time. These are coupled with the fact that we are clearly living in uncertain global times with the growing number of world conflicts, and no organisation knows how they will impact the cost of human lives, [the] business sector, or even their personal families' lives.
The American voter, as well as businesses, tend to place a big emphasis on what presidential candidates say they are going to do to improve the economic environment. As for US firms, they want economic stability, support for favourable trade relationships and domestic laws that don't impede the conduct of fair, honest and transparent business operations.
It is not a question of how the elections themselves will impact businesses, but how the potential incoming administration addresses the points above.
Peter Arnold, Partner, UK Chief Economist, EY
Another year of muted growth in the UK, while the US election is the number one risk to the global economy
What we saw in 2023 was a much more resilient [UK] economy than perhaps we thought we were going to see, although inflation was a little stubborn and drove interest rates higher than expected. I think the big concern is around the impact of interest rates, and whether the significant rise in rates is sufficient to force the economy into another downturn in 2024.
On the corporate side, there’s been a big increase in the cost of debt and the cost of capital. So we've seen a slowdown in corporate borrowing, where money simply hasn’t been available to fund new Capex, new investment, new factories or new transformation programmes.
The Eurozone did contract in Q3, but within that there is a lot of variety. Germany looks particularly challenged. France, Italy and Spain are probably in slightly better positions, reflecting a different kind of industrial mix and government policies.
The US has defied gravity in 2023 by avoiding a recession and growing at a rate faster than people thought. But the feeling is that growth rate of 2 percent will come down quite considerably in 2024 – to maybe around 1 percent, with some risk of a technical recession. I think the number one risk to the global economic outlook is the US election. It looks set to be a controversial affair and potentially quite divisive, adding to further geopolitical uncertainty currently on the risk radar.
I think that the UK will avoid a technical recession, but it's still going to be an ongoing period of stagnation. Growth [in 2023] is likely to have been about 0.6 percent and I would forecast … [2024’s] growth to be about 0.7 percent, so the real gloom that we were expecting 12 months ago hasn't come to pass. But that muted economic growth, for many, will still feel like very difficult trading circumstances.
Bridgette Hall, Senior Editor, Criticaleye
Emily Jones, Senior Editor, Criticaleye
Jacob Ambrose Willson, Senior Editor, Criticaleye
