2024: A gloomier world?

As economic woes and geopolitical tensions loom, brace for impact on climate, politics and beyond

For the third year in a row, world economic growth will do worse than in the previous year. At least according to the latest, and very similar, projections from the IMF (October) and OECD (November) summarised in the table. According to the IMF, global growth, which dropped to 3 per cent in 2023 in purchasing power parity terms (2.5 per cent when aggregated at market exchange rates) is expected to be a little lower in 2024, despite a small recovery in Europe and the avoidance of the long-predicted recession in the US. Growth in advanced economies, as a group, is expected to remain anaemic at 1.4 per cent in 2024, while the emerging market and developing economies (EMDEs) are projected to grow at 4 per cent, despite the much-commented slowdown of China.

It is worth noting that a 5 per cent growth in China’s $18 trillion economy adds about $900 billion to the world economy. In contrast, the $27 trillion US behemoth, growing at 1.5 per cent, adds about $400 billion, and the $3.7 trillion Indian economy, with 6.5 per cent growth, contributes about $240 billion. Among the EMDEs, Asia is expected to grow at nearly 5 per cent, Latin America at 2.3 per cent, and Sub-Saharan Africa at 4 per cent. On a positive note, the growth in the volume of world trade in goods and services is expected to recover from a measly 1 per cent in 2023 to about 3 per cent in 2024, according to both international organisations.

For India, the IMF projects growth in FY25 to hold steady at 6.3 per cent, while the OECD anticipates a modest decline to 6 per cent. In its latest projections last week, the Reserve Bank of India anticipates calendar year 2024 growth to decelerate to 6.4 per cent from the unexpectedly high 7 per cent now projected for FY24. In the prevailing global context, both are commendably high rates of growth. (A notable qualification by Pronab Sen, chairman of the official Standing Committee on Statistics and former chief statistician of the government, is that post-pandemic official GDP growth estimates may suffer from significant upward bias because of the underlying estimation methodology that uses available organised sector data to proxy for growth trends in the data-poor unorganised non-agricultural sector, where several indicators suggest a slower recovery from the pandemic’s serious negative impact).

Leaving this qualification aside, but bearing in mind our high fiscal deficit and government debt, elevated interest rates, and our weak trade and employment policies, I expect GDP growth in FY25 to be around 6 per cent.

Beyond these dry economic numbers, the geopolitical outlook appears distinctly grimmer. The war in Ukraine continues, as do many deadly civil conflicts in Myanmar, Syria, Congo, Sudan, Somalia, Nigeria, and a number of other African nations. In the last two months, following the massive terrorist attack by Hamas, Israel has been carrying out a brutal military onslaught on Gaza (materially supported by the US), which has already killed over 18,000 civilians (including about 40 per cent children) and injured many thousand more, and is precipitating what the UN calls a “spiralling humanitarian nightmare”. Although the immediate fallout on the global economy may be small, the fault lines in the global security system are clearly worsening.

On the growing planetary problem of global warming and climate change, the clutch of reports published last month by the UN Environment Programme and the World Meteorological Organization clearly paints a dark future for 2024 and beyond. Consider the following:

* Based on data through October, 2023 will be the warmest year on record at about 1.4 degrees Celsius above the pre-industrial baseline of 1850-1900. On over 30 per cent of the days, the average surface temperature was more than 1.5 degrees above pre-industrial levels. Furthermore, the past nine years are the warmest on record.

* Greenhouse gas levels are at a record high, as are sea surface temperatures and sea level rise, while Antarctic sea ice is at a record low. The rate of sea-level rise from 2013-22 is more than twice that in 1993-2002.

* Full and sustained implementation of unconditional nationally determined contributions (NDCs) would put the world on track for limiting the temperature rise to 2.9 degrees. The additional implementation and maintenance of conditional NDCs would limit temperature rise to 2.5 degrees.

* Over and above this, if all net-zero pledges are met, then the temperature rise could be limited to 2 degrees. But these pledges lack credibility as none of the G20 countries are currently reducing emissions in line with these pledges.

* Currently, governments in aggregate still plan to produce more than double the amount of fossil fuels by 2030 than would be consistent with limiting warming to 1.5 degrees.

* Adaption is slowing on all fronts for lack of finance, planning and implementation capacity.

* None of this is likely to change because of the just-completed COP28.

In sum, it seems there is no realistic chance of limiting temperature rise to the aspirational 1.5 degree goal agreed in Paris in 2015 at COP21. Even 2 degrees seems a bridge too far. With a lot more serious effort and/or major technological breakthroughs, 2-2.5 degrees may be possible. That would be better than a 2.5-3 degrees increase, but would probably imply a much nastier planet than our current condition.

Perhaps the most fearsome “known unknown” of 2024 will be the outcome of the US presidential election of November 2024. If Donald Trump returns to power (and he currently leads Joe Biden in some polls), the future will be grim. This time will be a lot worse, as he will feel seriously empowered in his anti-environment, anti-immigrant, anti-internationalist and possibly racist credo…and armed with chosen staff and well-prepared briefing books, which are already in the works. Among the declared prospects are: A determined assault on existing checks and balances in the US governmental system; a de facto withdrawal of the US from Nato (through reneging on Clause 5); withdrawal from international organisations such as the World Bank, IMF and WHO; imposition of a 10 per cent import tariff on all traded goods; and a very lax regime for fossil fuel exploration and production (Mr Trump is a “climate denier”).

And I haven’t even mentioned the conflict possibilities over Taiwan and the South China Sea!

Happy New Year!

The writer is chancellor, Central University of Andhra Pradesh, honorary professor at ICRIER, former chief economic adviser to the Government of India, and author of An Economist at Home and Abroad (Harper Collins,2021)