The global economic performance exhibits four major characteristics
The global economy presents four major characteristics
For the global economy, 2024 will be a year of both mediocrity and high uncertainty, "said Lin Jianhai.
Lin Jianhai analyzed that the world economy has shown four major characteristics this year.
Firstly, the economic growth rate is slow and uneven. The International Monetary Fund predicts that the global economy will grow at an annual rate of around 3% in the coming years, which is lower than the average annual growth rate of 3.8% in the past two decades. The world economic growth rate is expected to remain basically the same as last year in the next two years, which is called 'mediocre'. The imbalance is also very obvious. On the one hand, the growth of developed economies tends to stabilize, but the growth rate continues to be slower than that of emerging markets and developing countries. However, the speed at which developing countries catch up with developed economies is slowing down. On the other hand, there is a significant difference in performance between emerging markets and developing countries.
Secondly, the global trade outlook has improved, but the long-term trend is still not optimistic. In the past few decades, the growth rate of global trade has usually been higher than the economic growth rate. However, in recent years, global trade growth has been sluggish due to the slowdown in economic growth, the escalation of trade protectionism, and the impact of economic fragmentation. IMF analysis shows that the global trade volume of goods and services will only grow by 0.8% in 2023, far below the growth rate of the global economy. In 2024 and 2025, the growth of global trade is expected to rebound to the global economic growth rate of around 3%, but it will still be subject to factors such as trade restrictions and geopolitical conflicts.
Thirdly, from the perspective of monetary policy, market interest rates in developed economies have begun to decline, but will still remain higher than pre pandemic levels. The Bank of Canada, the European Central Bank, and the Bank of England have all initiated interest rate cuts, with the Federal Reserve expected to begin cutting rates in September. However, in the medium to long term, short-term interest rates in the United States may remain between 3.0% and 3.5%, while medium to long-term interest rates may remain around 4%, making it difficult to return to low levels. The Bank of Japan announced a rate hike on July 31st. The interest rate changes of major developed economies' central banks will bring uncertainty to capital flows and exchange rate fluctuations in emerging market countries.
Fourthly, from the performance of the world's largest economy, the United States, although its growth has stabilized, the problem remains severe. One possibility is that inflation may not fall below the Federal Reserve's target level of 2%, forcing interest rates to remain at a higher level. Secondly, the Federal Reserve's slow interest rate cuts have affected economic growth, and the recent sharp fluctuations in the stock market also reflect this concern in the market. Thirdly, the government's debt is heavy and constantly rising, resulting in long-term interest rates remaining at a relatively high level. Fourthly, trade protectionism continues to strengthen, weakening its economic competitiveness. Fifth, income inequality has further worsened and social cohesion has continued to decline.
Major challenges and development opportunities coexist
The global economy is recovering from the impact of the COVID-19 epidemic and geopolitical risks. Although there is no recession in the global economy, the short-term recovery and stabilization cannot hide the difficult challenges in the medium and long term.
Lin Jianhai warns of several major challenges facing the global economy:
——The high level of debt in various countries casts a shadow on future economic development. By the end of 2023, the total global debt will be equivalent to 330% of global GDP, which has surged by $100 trillion over the past decade. The appreciation of the US dollar and the increase in US interest rates in the past two years have also increased the debt pressure and risk for some emerging markets and developing countries.
——The risk of decoupling the world economy and trade is increasing. The IMF pointed out in a report that if economic and trade decoupling occurs on a large scale, the damage to the world economy will reach up to 7% of global GDP, equivalent to the total size of the economies of France and Germany.
——2024 is the year of world elections, with elections held in 76 countries and regions worldwide, covering 41% of the world's population and 42% of its GDP. The turmoil of regime change has added more uncertainty to the global economy.
——In the near future, geopolitical relations and global security tensions are likely to continue, bringing high uncertainty to world energy and food prices.
Lin Jianhai believes that in the long run, factors such as low labor productivity, the impact of population changes, increasing income inequality, and climate change also pose challenges to future economic development.
However, global economic development will also usher in new opportunities for growth. New technologies are rapidly developing at an unprecedented pace, and the "new manufacturing" industry and cutting-edge technology will inject new vitality into future industries. A batch of disruptive products and technologies will reshape production, work, and lifestyle, bringing new breakthroughs and developments to the global economy. Making full use of digital technology to promote the maturity of the industrial Internet will significantly improve labor productivity, thus promoting sustained and rapid economic development. The rapid development of artificial intelligence has also opened up vast potential for economic growth.
The Chinese economy still has resilience and vitality
International organizations have successively raised their expectations for China's economic growth since the beginning of this year. The IMF recently raised its forecast for China's economic growth in 2024 to 5%, indicating that the Chinese economy has shown strong resilience.
Lin Jianhai believes that the medium and long-term development prospects of the Chinese economy are broad. In Lin Jianhai's view, a stable political and social environment is an important guarantee for the long-term improvement of the Chinese economy. From the perspective of human capital, China has a workforce that has received good education and professional training. In the coming years, China will continue to enjoy the advantages brought by the talent dividend. There is still room for growth in China's labor supply, and there is still vast space for industrial upgrading and technological progress. From an international comparison perspective, both China's service industry and urbanization have significant development potential.
Lin Jianhai suggests that timely and effective policy support will help boost confidence and accelerate the adjustment process. To cope with the deterioration of the external environment, higher levels and deeper openness are needed. In the medium to long term, improving labor productivity is an urgent task facing the Chinese economy and an important guarantee for sustained economic growth. IMF research shows that if strong structural reform measures are taken to improve labor productivity, China's growth potential can be further enhanced.
