2024-03-04 21:55:00
For almost four years, the global economy has been operating in a turbulent climate, marked by a series of unforeseen events and increasing risks. As such, Lahcen Haddad explores four possible trajectories for this economy, providing crucial insight for those seeking to navigate these choppy waters.
In an open forum called “Trends 2030, risks and scenarios”, of which Hespress FR has a copy, the former minister of tourism and expert in strategic studies, Lahcen Haddad, delivered a detailed analysis of the evolution of the global economy. It highlights the current lack of clarity, the accumulation of risks and the succession of disruptive factors.
According to the specialist, the global economy has been navigating for nearly four years in a climate of uncertainty, characterized by the accumulation of risks and the succession of disruptions. “ Despite the current robustness of the global economy, we are living in a period of uncertainty and waiting with unknown consequences“, he argued.
While economic stability appears to be maintained despite monetary pressures from central banks, threats such as armed conflict and climate change weigh on sustainable development, Haddad says. At the same time, the labor market seems to be resisting rising interest rates, thanks to controlled inflation rates which limit the pressure on them.
Despite this apparent solidity, it is crucial not to underestimate the risks involved, the expert pointed out, noting that the slowdown in growth forecast for 2024 (2.4%), fluctuations in investment in capital and the slowdown in international trade (only 0.6% in 2023 compared to 3% in 2022) are inevitable consequences of the weak dynamism of the euro zone economy. Additionally, the US economy might enter a full-blown recession in 2024, according to some analyses.
Meanwhile, the economies of China (+5% in 2023), India (+6%), Russia (3.6%) and Indonesia (5%) continue to grow significantly. significant and sustained, contrasting with the more gloomy picture of certain Western economies.
With this in mind, Haddad examined the major trends that will shape the global economy over the next six years. He recalled that the world population should reach around 8.5 billion inhabitants, according to the United Nations, with a growing proportion of elderly people (5 out of 6 in Europe will exceed 65 years, according to the Statistics Office of the European Parliament). .
At the same time, the temperature will continue to rise (Brad Plumer, New York Times, March 20, 2023), the urbanization rate will reach 60% (United Nations), the number of devices connected to the Internet will increase to 125 billion compared to 27 billion in 2017 (according to a summary from “Semi-Conductor”), and the richest 1% will hold two-thirds of the world’s wealth (Michael Savage, The Guardian, April 7, 2018). In terms of the global economy, China will take the lead, followed by the United States, India, Japan, Indonesia and Russia (Lowy Institute, “Asian Power Ranking”, “Power Ranking economy for 2030).
« The current situation, year-over-year growth forecasts and the impact of the general future directions we discussed above give us scenarios for how the global economy will evolve between now and 2030“, he said before dissecting the four scenarios for the evolution of the global economy between now and 2030 developed by the McKinsey Global Institute.
The first scenario, named by McKinsey experts “Repetition of the performance of the global economy”, envisages a return to the period 2000-2020. It is characterized by reduced disruption, increased savings, low levels of investment, relative labor market flexibility, low inflation and low interest rates.
In this scenario, continues the former minister, productivity and growth would remain low, while wealth would increase to the detriment of real economic production, thus exacerbating inequalities between the rich and the poor. This scenario is very likely, especially with the intervention of central banks to reduce inflation. However, it might be more pronounced, especially due to disruptions in production and distribution chains following the coronavirus pandemic.
As for the second scenario, it envisages a form of inflation associated with a recession, similar to the 70s of the last century, noted Haddad. He said this would require an interest rate of up to around 4%, causing the value of real estate and stock market assets to collapse. Banks would find themselves in a delicate position, trying to juggle fighting inflation with maintaining financial stability.
In addition, he highlighted the current instability which is causing disruptions in markets and leading to a deterioration in household wealth. This situation is reinforced by events in Ukraine, Gaza and the followingmath of COVID-19, reminiscent of tumultuous periods such as the Vietnam War, the oil shock and the Cold War.
For the expert, a scenario similar to Japan’s “lost decade” in the 1990s, marked by recession and economic stagnation following the bursting of the real estate and financial bubbles, is likely. Restrictive monetary policies aimed at reducing inflation might cause asset values to fall, putting institutions in difficulty.
Another risk concerns debt reduction, which pushes households to repay rather than spend, reducing consumption and negatively impacting the economy. Local economies with housing bubbles, as well as the rise of the AI-driven stock bubble, might also lead to economic collapses, Haddad said.
On the other hand, a scenario of growth in income and wealth through increasing investments and the use of artificial intelligence to increase productivity is possible. In this case, inflation remains under control and interest rates remain low, favoring productive investment and economic stability.
To address these risks, companies must strengthen their core assets and financials. Governments must control macroeconomic balances, strengthen fiscal and redistributive policies, support the digital and energy transition, and guarantee health, food and water security. These measures, combined with better governance and increased transparency, will help reduce risks and ensure sustainable and prosperous growth for all, said Lahcen Haddad.
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