The Centre for Economics and Business Research’s (CEBR’s) short-term forecast is pretty much in line with consensus. It projects that 2024 will see global growth a little below 3%. The US and China will lead the world, whilst slowing.
The US will have less fiscal stimulus to keep things going at the rapid pace seen in 2022-23 and China is still combating an over-extended property sector. This limits how much the overall Chinese economy can achieve – even with the greater stimulus Beijing is now gradually administering. Europe will remain sluggish, reflecting the tight money squeeze adopted this year.
The longer-term trends show India surging to third-largest economy by 2038 in the CEBR’s outlook. China is forecast to be first and the US second. Significantly, that still leaves China way behind the US in Gross Domestic Product (GDP) per capita. Japan falls from second to fourth place. Germany declines to fifth and the UK stays in sixth. France and Brazil manage seventh and eighth. South Korea advances rapidly to ninth, with Canada in tenth. Indonesia performs very strongly to reach eleventh with Italy down at twelfth and Russia down to fourteenth. Other Asian countries to join China, India, Korea and Indonesia on the rise include Vietnam, Bangladesh and the Philippines.
We have long commented on the economic growth of China. We lowered our forecasts for longer-term growth during the Covid-19 pandemic and as a result of China's fractious relationship with the US in recent years. This reflects the Chinese government's own reductions in forecasts. We have also pointed out how, over many years, Chinese economic progress has not been reflected in reliable stock exchange gains. Good money could be made there in the bubble run ups in 2007 and 2015 – but the Shanghai index in recent years has stayed well below these past highs. There are also concerns about governance and the terms offered to foreign investors in Chinese equities.
We have liked India, where stock market performance has been more responsive to fast economic growth over several years. Its sheer weight of population points to India playing a substantially larger role in world output and in world affairs on the back of rising prosperity. Its equity market is no longer such good value as many have come to back this growth story and boosted valuations. Many investors prefer the market and government background to those operated in China, so will pay a premium for its equities. It is a natural choice for all who want some exposure to emerging-country growth without the additional political risks of China.
As we enter 2024 it seems likely that leading Asian economies will continue to advance.
South Korea has increased its GDP and living standards well in the seventy years since the Korean War. It has benefitted from strong US backing and has moved heavily into electronics. It now has similar levels of GDP per head to some advanced European countries. It could well continue to outperform the global economy, with the country rising further up the rankings. Indonesia is also doing well with a prudently managed economy.
These forecasts vary from year to year and are more vulnerable the longer the term of the estimate. Nonetheless, CEBR creates a debate about important long-range trends for investors by being willing to put some thoughts out about likely developments and its view on the fortunes of different approaches to economic management.
As we enter 2024 it seems likely that leading Asian economies will continue to advance, as large populations seek higher living standards and so come to represent a higher proportion of the world total. Europe is destined to relative decline. Despite maintaining relatively high per capita output and spending power, the smaller European populations will be outpaced in total output by Asia's progress. Europe's 33.5% share of world GDP in 2008 had slipped to 23.6% this year and is forecast by the CEBR to fall to 19% by 2038.
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