EIU One Click Report World

24. 1. 13.
오후 4:00 EIU-one-click-report-world
One-click report : World

January 1st 2024
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24. 1. 13. 오후 4:00 EIU-one-click-report-world
Content
1. Summary
1.1 Key trends
1.2 Global forecast data
2. Medium-term forecast
2.1 Monthly global overview
2.2 Exchange rates
2.3 Trade and external sector
2.4 Risk scenarios
2.5 Commodity prices
3. Industry outlook
3.1 Consumer goods
One-click report : World ,January 13th 2024
One-click report : World

Key trends
World | Summary | Highlights
January 1st 2024
Geopolitical shocks are weighing on the outlook. The Israel-Hamas war adds complexity to a global
geopolitical environment characterised by intensifying competition and fragmentation. EIU sees
geopolitical tensions, as also stoked by Russia's invasion of Ukraine and US-China rivalry, leading to
greater economic fragmentation and supply-chain reorganisation.
We expect restrained global growth but no recession. Global economic growth is forecast to decelerate
to 2.2% in 2024, from an estimated 2.5% in 2023. A slowdown in the US will be partly offset by an
uptick in Europe, and moderate stimulus in China will help to shore up growth there. Global growth is
forecast to strengthen to 2.7% a year on average in 2025-28, aided by monetary easing and investment
in technology and clean energy, but it will remain below the historical trend.
Progress in addressing supply-chain snarls and softening demand will cause average inflation in
developed economies to ease from an estimated 4.6% in 2023 to 2.5% in 2024, indicating no wage-
price spiral. Risks to our inflation outlook are weighted to the upside. A widening of the Israel-Hamas
war would drive up hydrocarbon prices, and stronger than expected effects from El Niño climate
conditions on agriculture production would push up global food prices.
We believe that major Western central banks have concluded policy rate rises, although rate reductions
are not forecast until the second half of 2024. Emerging-market central banks will see the halt in global
tightening as an opportunity to lower policy rates. Higher levels of investment and tighter labour
markets mean that interest rates will not return to the low levels of the 2010s.
The end of US monetary tightening will remove some support for the US dollar, but its safe-haven
status means that it will be broadly stable rather than significantly weaken. Japan's move away from
ultra-accommodative monetary settings will lift the yen, and structural changes in the euro zone's
terms of trade will challenge the euro. A lack of alternatives means that de-dollarisation initiatives will
struggle to advance.
Global forecast data

World | Economy | Forecast | International assumptions
January 1st 2024
(Forecast closing date: December 12th 2023)
Global forecast
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Real GDP growth (%)
World (market exchange rates) 2.3 -3.3 6.1 3.1 2.5 2.2 2.6 2.7 2.7 2.7
Developed economies 1.7 -4.1 5.5 2.6 1.5 1.1 1.7 1.8 1.8 1.9
Developing and emerging economies 3.2 -2.1 7.0 3.8 4.0 3.8 3.9 3.8 3.8 3.7
US 2.5 -2.2 5.8 1.9 2.4 1.0 1.7 2.0 2.0 2.2
Japan -0.4 -4.3 2.3 0.9 1.8 1.4 1.2 1.2 1.1 1.1
Euro area 1.6 -6.3 5.9 3.5 0.6 0.8 1.6 1.6 1.6 1.5
https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023
China 5.9 2.2 8.4 2.9 5.5 4.9 4.4 4.0 3.8 3.6
World (PPP exchange rates)a 2.8 -2.8 6.4 3.4 3.1 2.9 3.2 3.2 3.2 3.0
World trade growth (%)
Goods 0.2 -5.0 11.1 3.3 0.8 2.5 3.4 3.5 3.7 3.6
Consumer price inflation (%; av)
Worldb 3.6 3.3 5.3 9.2 7.4 6.0 3.8 3.4 3.2 3.1
Developed economies 1.4 0.7 3.0 7.0 4.6 2.5 2.0 2.0 2.0 2.0
Developing and emerging economiesb 5.5 5.7 7.3 11.2 10.0 9.2 5.5 4.7 4.3 4.1
US 1.8 1.3 4.7 8.0 4.1 2.6 2.3 2.3 2.4 2.4
Japan 0.5 0.0 -0.2 2.5 3.2 2.0 1.1 1.3 1.4 1.2
Euro area 1.2 0.2 2.5 8.4 5.5 2.7 2.0 2.0 2.0 1.9
China 2.9 2.5 0.9 1.9 0.7 2.0 1.5 1.9 1.8 1.8
Export price inflation (%)
Manufactures (US$) -1.4 0.9 5.1 -2.2 4.6 2.4 5.0 3.3 2.1 3.1
Commodity prices
Oil (US$/barrel; Brent) 64.0 42.3 70.4 99.8 82.8 79.7 74.9 70.0 65.7 62.4
% change -9.9 -33.9 66.5 41.7 -17.1 -3.7 -6.1 -6.6 -6.1 -5.0
World non-oil commodity prices (US$, % change) -6.3 2.9 37.9 14.7 -15.0 -2.0 1.0 0.1 0.7 1.1
Food, feedstuffs & beverages -4.3 7.8 36.1 22.2 -16.9 -5.2 -4.0 -0.8 -0.7 -0.7
Industrial raw materials -8.6 -3.2 40.4 4.6 -12.0 3.0 8.0 1.2 2.4 3.3
Main policy interest rates (%, end-period)
Federal Reserve 1.63 0.13 0.13 4.38 5.38 4.88 3.88 2.88 2.63 2.63
Bank of Japan -0.03 -0.03 -0.03 -0.06 -0.04 0.00 0.00 0.00 0.00 0.10
European Central Bank 0.00 0.00 0.00 2.50 4.50 4.00 3.00 2.25 2.25 1.75
Bank of England 0.75 0.10 0.25 3.50 5.25 5.25 4.25 3.25 3.00 3.50
Exchange rates (av)
US$ effective (2010=100) 116.4 118.0 115.6 126.6 126.5 126.6 122.9 121.4 121.3 120.0
¥:US$ 109.0 106.8 109.8 131.5 141.5 140.0 116.5 107.8 105.3 104.9
US$:€ 1.12 1.14 1.18 1.05 1.08 1.10 1.16 1.18 1.20 1.20
Rmb:US$ 6.91 6.90 6.45 6.74 7.09 7.10 6.98 6.89 6.88 6.83
US$:£ 1.28 1.28 1.38 1.24 1.24 1.24 1.30 1.31 1.34 1.39
¥:€ 122.1 121.8 129.9 138.5 153.2 154.4 134.5 127.1 125.8 125.9
£:€ 0.88 0.89 0.86 0.85 0.87 0.89 0.89 0.90 0.89 0.87
Exchange rates (end-period)
¥:US$ 108.7 103.2 115.2 131.8 151.7 125.3 110.9 106.0 105.0 105.0
Rmb:US$ 7.01 6.55 6.37 6.99 7.22 7.03 6.93 6.89 6.88 6.70
US$:€ 1.12 1.23 1.13 1.07 1.08 1.14 1.18 1.19 1.20 1.20
a The 125 countries for which EIU publishes five-year forecasts. b Excludes Venezuela.
Source: EIU.
Monthly global overview

World | Economy | Forecast | Economic growth
January 1st 2024
(Forecast closing date: December 12th 2023)
World summary
(% change)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Real GDP growth (PPP exchange rates)
World 2.8 -2.8 6.4 3.4 3.1 2.9 3.2 3.2 3.2 3.0
Real GDP growth (market exchange rates)
World 2.3 -3.3 6.1 3.1 2.5 2.2 2.6 2.7 2.7 2.7
North America 2.2 -2.9 5.7 2.2 2.3 1.1 1.7 2.0 2.0 2.2
Europe 1.8 -5.5 6.5 3.2 1.0 1.2 1.8 1.9 1.9 1.8
Euro area 1.6 -6.3 5.9 3.5 0.6 0.8 1.6 1.6 1.6 1.5
Asia-Pacific 3.5 -1.3 6.2 3.1 4.1 3.9 3.7 3.5 3.5 3.5
Latin America and the Caribbean -0.6 -6.9 6.9 4.0 2.4 1.7 2.5 2.3 2.4 2.4
Middle East 0.6 -3.6 4.3 6.3 1.2 2.6 3.4 3.4 3.9 3.1
Africa 2.7 -2.8 4.7 3.6 2.6 3.1 3.5 3.7 3.8 3.7
Inflation (av)
Worlda 3.6 3.3 5.3 9.2 7.4 6.0 3.8 3.4 3.2 3.1
Developed economies 1.4 0.7 3.0 7.0 4.6 2.5 2.0 2.0 2.0 2.0
Developing and emerging economiesa 5.5 5.7 7.3 11.2 10.0 9.2 5.5 4.7 4.3 4.1
Trade in goods
World 0.2 -5.0 11.1 3.3 0.8 2.5 3.4 3.5 3.7 3.6
Developing and emerging economies -0.3 -3.4 12.0 1.8 3.0 3.9 4.1 3.9 4.1 4.0
a Excludes Venezuela.
Source: EIU.
Geopolitical shocks are weighing on the economic outlook

The Israel-Hamas war is adding further complexity to a global geopolitical environment characterised by
intensifying competition and more frequent conflict. Underlying these changes are the greater diffusion
of power and erosion of US primacy. EIU believes that geopolitical tensions, also stoked by Russia's
invasion of Ukraine and US-China rivalry, will lead to more fragmentation and regionalisation in the
world economy, dragging on growth potential. Government policy will increasingly push firms to revisit
their supply chains, to avoid sanctions and to take advantage of new industrial incentives. The escalation
of conflicts in Asia, Europe or the Middle East would upend our global outlook.
Global growth will be sedate but not recessionary
The lagged impact of a broad rise in interest rates will constrain global economic activity in 2024, but
there are no indications of systemic strain in debt markets that could pull the world economy into a
painful contraction. We forecast that US growth will slow significantly in 2024 but a recession will be
avoided, and some momentum will build in Europe as German industry normalises following energy-
related disruptions. Moderate stimulus in China will inject some momentum behind its economy in
2024, whereas other emerging markets will benefit from reduced uncertainty related to the end of global
monetary tightening. We forecast that global economic growth will decelerate from an estimated 2.5% in
2023 to 2.2% (at market exchange rates) in 2024. The outlook improves in 2025-28 (we expect annual
growth to average 2.7%), aided by the onset of monetary easing and increased funding for investment in
technology and the energy transition. However, this will still not match recent standards—global growth
averaged 3% a year in the 2010s.
Disinflation is forecast to continue, with risks weighted to the upside

The supply-side shocks that drove initial price increases will continue to ease following the
normalisation of supply chains in 2023. This will drive inflation lower in most markets (we forecast that
it will average 2.5% across developed economies in 2024), if not undo the rapid price gains of recent
years. Risks to our inflation outlook are weighted more to the upside. A widening of the Israel-Hamas
war that disrupts oil supply would drive up hydrocarbon prices, and stronger than expected effects from
El Niño climate conditions on agriculture output would push up food prices, especially in
developing economies.
Monetary tightening is over, but there will be caution on loosening

Our forecasts assume that the Federal Reserve (Fed, the US central bank) and the European Central Bank
(ECB) have concluded their policy rate increases, although a desire to fully anchor inflation expectations
means that both institutions are unlikely to begin lowering rates until the second half of 2024. Japan's
steady move away from ultra-accommodative settings will continue in 2024. Some emerging markets
will be in a position to lower rates earlier than the Fed to support growth, and China will maintain a
loose stance to fend off deflation risk. We do not expect a return to the near-zero interest rates of the
2010s over the next five years, with higher trend investment and tightness in labour markets (related to
population ageing and workforce changes) keeping a floor under inflation.
Emerging markets and green industries lead global growth opportunities

Even with China's economy slowing to less than 4% growth by 2028, we forecast that developing and
emerging economies will contribute the bulk of global GDP growth over the next five years, helped by
stronger contributions from South and South-east Asia, among other regions. At the sectoral level, we
see opportunities tied to supply-chain restructuring and demand for resources that are critical to future
industries and the green transition. Artificial intelligence will create cost-cutting opportunities and lead
to some disruption, but overall we believe that it is more likely to augment—rather than replace—human
capabilities, resulting in job changes rather than job destruction.
Fragmentation and regionalisation will define politics and policymaking

The passage of the worst of the cost-of-living crisis will ease some short-term pressures on
policymakers, but the austerity measures now required to repair public finances and insulate
governments from higher borrowing costs will be unpopular. Political support for moderate, liberal
policies will remain weak, and economic policymaking will generally push in a more insular direction,
to the disadvantage of international co-operation on critical climate and technology issues. The 2024 US
presidential election will highlight political and cultural division there, and could prompt another
sweeping set of policy changes if Republicans were to win the presidency (this is not our baseline
forecast, but the risk of it occurring is high). In Europe, politics is moving towards the right in response
to economic and migration pressures. Authoritarian regimes could face existential challenges of their
own, and governance in many parts of the world will be challenged by threats ranging from climate
change to terrorism.
Exchange rates
World | Economy | Forecast | Exchange rates
January 1st 2024
The yen will shift the most among advanced economy currencies
Financial markets are moving away from speculating on the possibility of further policy interest-rate
rises in advanced economies and towards consideration of the timing of rate reductions. The strength of
the US dollar will moderate as portfolio reallocation based on an expectation of an eventual fall in US
rates accelerates. Most advanced economy currencies will appreciate gradually in 2024, with the notable
exception of the yen. The Japanese currency will rise more sharply against the US dollar in the second
half of the year, as US-Japan yield differentials will narrow and markets will incorporate future policy
normalisation by the Bank of Japan (BOJ, the central bank). Inflows will be made up in large part by
Japanese institutional investors closing medium- and long-term positions elsewhere.
Domestic and external monetary policy will also support the yen
The yen will continue to strengthen in 2025 as market consensus on monetary policy normalisation
builds, then is confirmed first with a further loosening of yield curve control, followed by a slight shift in
negative policy rates towards zero. Decelerating inflation and policy rate cuts in Europe and the US will
add to demand for the Japanese currency. EIU assumes that by 2026 the appreciation trend will largely be
at an end, with the yen close to its 2019-20 average nominal rate against the US dollar, but far lower in
real terms after several years of an enlarged inflation differential.
The euro will appreciate, but sterling will struggle

The euro will move higher against the US dollar from 2024 until 2026, aided by a widening average
current-account surplus in the EU, but sterling will follow a more difficult recovery path. The pound will
struggle against the US currency in 2024 as the Bank of England (BoE, the central bank) holds off on
further rate increases and confidence in the economy remains weak. The UK currency will also lose
ground against the euro in that year. Sterling will trend higher against the US dollar and the euro in 2025-
28, aided by a later start to monetary easing, but it will be a slow trend amid an unremarkable pace of
economic growth in the UK.
Control of inflation will help to drive emerging-market currency gains

The outlook for emerging-market currencies will depend in many cases on policy responses to global
inflationary pressures and trends in energy prices. The currencies of India, Indonesia and Mexico will
depreciate slightly in 2025-28 after the initial boost from the weakening US dollar. Despite China's large
trade surplus, the renminbi will stand out as a weaker emerging-market currency. Chastened investor
sentiment will be a major driver in the immediate term, but the main determinant from 2025 onwards
will be intervention to restrain the value of the currency. One of the biggest risks to emerging-market
currencies will be geopolitical tensions, and large politically destabilising international events would
lead to capital flight towards safe-haven currencies.
The role of the US dollar will not be disrupted
Frustrations regarding sanctions and the overwhelming influence of US policy on international liquidity
are pushing some emerging markets to explore alternatives to the current international financial
transfer architecture, which is dominated by the US and allied countries. A combination of China's
importance in global trade and its efforts to develop a new financial messaging system make it a more
feasible alternative than other non-US aligned emerging markets. The current intrinsic role of the US
dollar in international finance and the limits of renminbi internationalisation rule out the possibility of
a parallel alternative to the US-dominated system for decades to come. China will nevertheless continue
to develop an alternative, less comprehensive financial infrastructure backed by efforts to increase
renminbi liquidity without comprehensive capital-account liberalisation, but these efforts will have a
negligible impact on the status quo in 2024-28. Operating outside the US-dominated system will remain
a riskier and more costly option that countries will choose only as a last resort.
Trade and external sector

World | Economy | Forecast | External sector
January 1st 2024
World trade
(% change; goods)
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
World trade 0.2 -5.0 11.1 3.3 0.8 2.5 3.4 3.5 3.7 3.6
Developing and emerging economies -0.3 -3.4 12.0 1.8 3.0 3.9 4.1 3.9 4.1 4.0
Source: EIU.
Growth in global goods trade will begin to rebound in early 2024

A stabilisation in the Chinese economy will offer some support to global demand in the first half of 2024.
Chinese imports will be tilted towards commodities and raw material sectors linked to domestic
infrastructure construction, given that consumer goods demand is largely met by onshore production.
Firming demand from the US and the EU will reflect inventory electronics destocking from 2022-23,
which will translate into stronger factory activity in Asia. High global interest rates, fragile investor
sentiment and an expected weakening in US and EU consumption will act as countervailing factors. A
marked upturn in Western trade demand is unlikely until the second half of 2024, keeping annual global
trade growth (in volume terms) slightly weaker than the pre-pandemic average.
Outlook for global services trade is more positive

The promising outlook for services reflects the nearshoring in manufacturing supply chains; Brazil,
Mexico and Poland, for example, are enjoying a boom in financial and telecommunications service
exports, driven by related foreign investment. A strong rebound in international tourism also paints a
positive picture for global services trade, but countries that rely on tourists from China will experience a
more gradual tourism recovery, given EIU's view that Chinese outbound travel will not recover fully
until 2025.
Climate change and environmental concerns are influencing trade

Environmental goals will increasingly drive companies to "green" their supply chains. The deployment
of industrial policies aimed at fostering the development of domestic renewable energy industries—
including electric vehicles (EV) and battery manufacturing, as well as related critical materials mining—
will create new opportunities, while posing a challenge to exporters ranging from fossil fuel extraction
to chemicals and heavy industry. The EU's concerns around deforestation in particular will keep that
bloc at the centre of many future trade fights, particularly with the developing world, such as in its
dispute with Indonesia and Malaysia over palm oil. Its Carbon Border Adjustment Mechanism, although
phased in gradually, will disproportionately affect developing nations, where governance capacity will
struggle to meet EU-mandated thresholds.
Industrial policy will lead to frictions

These same themes will also spark tensions around trade protectionism, including around import
substitution and concerns over market-distorting policies. China's global competitiveness in EV
production has attracted scrutiny over the subsidisation of its domestic new-energy vehicle industry
over the past decade. The EU began investigating China's EV industry in September, and in December the
US moved more forcefully to wean its automotive supply chains away from Chinese raw materials and
component producers. Tighter trans-Atlantic pressure on China's EV industry is likely in 2024, although
this will not dislodge China's dominance in that sector.
Additional US-China trade actions are coming

The intensifying US-China rivalry has caused the US to pressure its major partners—including Australia,
the EU, Japan and South Korea—to align themselves with US trade restrictions on China. These have
included export controls targeting the advanced technology sector, which the US has expanded to
include co-ordination with Japan, the Netherlands and other markets. China's recent advances in
semiconductor fabrication (to 7nm production) will prompt the US to continue tightening its export
controls on China throughout 2024, and US concerns over the EV supply chain will complicate the
operations of US automakers in the Chinese market.
EU-China trade frictions will intensify

Our trade and geopolitical outlooks assume tighter co-ordination on trade measures between US allies.
Although this pressure will be felt most prominently in Asia, it will also extend to Europe,
complementing discussions within the EU around "de-risking" its economic relationship with China.
The EU probe into Chinese EV exports will be the most visible of these actions, but potential disputes in
sectors including healthcare, wind turbines and solar panels will also be risks to watch in 2024.
Supply-chain diversification will be selective rather than en masse

Despite calls from policymakers, we do not expect a corporate exodus from the Chinese market. Instead,
more multinationals will adopt "China plus" strategies to hedge against uncertainty. Asian countries will
benefit the most from investment diversification from China, with inward investment flows into South-
east Asia projected to exceed those destined for China in 2024-28. Nevertheless, China will remain an
important source of key intermediate inputs across many different industries.
Reshoring will reform, rather than reshape, global trade

Investment diversification will restructure Asian trade patterns, such as by lifting export-import flows
between China and South-east Asia, but not reduce China's position in global value chains. Policy calls
around re-shoring, nearshoring or friendshoring will struggle to definitively reshape supply chains as
multinational companies continue to prioritise operational considerations—like input costs, tax
regimes, financing, labour availability and proximity to end-markets—in their investment strategies. To
that end, nearshoring will also benefit Latin American and eastern European countries with strong
business environments, with markets like Chile and the Czech Republic well positioned to
attract investment.
Risk scenarios
World | Economy | Forecast | Global risk scenarios
January 1st 2024
Events may diverge from EIU's forecasts in ways that affect global business operations. The main risks
are represented by the following scenarios.
A green technology subsidy race becomes a global trade war

Western economies are rolling out generous incentives for businesses to invest in clean energy
technologies to achieve net-zero greenhouse gas emissions and enable greater competition with China,
which is the global leader in green technology production. Most incentives include strict sourcing
requirements for components (notably in the US). These requirements have already spurred tensions
between the EU and the US, and will probably raise the cost of green technologies. If Western relations
with China sour substantially, Western economies could increase existing tariffs on Chinese imports or
accelerate decisions on pending investigations into anti-dumping and state subsidy charges, further
fuelling price growth. China would retaliate, possibly by blocking exports of raw materials that are
critical to the green transition agenda such as rare earths, making decarbonisation efforts more
expensive for developed markets. These costs would force economies to consider returning to carbon-
based technologies and limit support from Western countries to fund emerging markets' energy
transition.
Extreme weather events caused by climate change disrupt global supply chains
Climate change models point to increased frequency of extreme weather events. So far these have been
sporadic and in different parts of the world, but they could start to happen in a more synchronised
manner. Severe droughts and heatwaves have already weighed on crop yields, and the emergence of a
strong El Niño could exacerbate weather events and lead to record-high global temperatures in 2024. If
extreme weather events have a significant impact on production, this could lead to shortages, straining
global supply chains and once again adding to upward inflationary pressures. Higher costs would
probably spill over to households, exacerbating concerns about the cost of living and food security. Food
shortages in some parts of the world could lead to mass migration, or even war, triggering severe
political impacts that could ripple across multiple countries. Countries in Africa's Sahel region are
particularly vulnerable to food and water shortages, as a wave of coups has severely weakened state
capacity to deliver necessities to the population, and political instability and a reduced presence of UN
peacekeeping forces have raised the risk of conflict in the region.
Industrial action spreads, disrupting global productivity

The sharp rise in prices in 2022-23 and the failure of wages to keep pace with them will continue to fuel
worker discontent in 2024-25. The net impact has been to make it harder for households to maintain
their quality of life and purchase essential goods and services. This could spark wider social unrest,
expanding the protests and industrial action already seen in Europe, the US, South Korea and Argentina.
The success enjoyed by workers in bargaining for higher wages in some markets and sectors, such as US
automotive workers, could also embolden organised labour into wider action. In an extreme scenario,
protests could push workers in major economies who are employed by large manufacturers to co-
ordinate large-scale strikes demanding salary increases that match inflation. Such movements could
paralyse entire industries or public services for an extended period and spill over to other sectors or
countries, weighing on global growth. Although strong wage rises will bolster consumption, they will
also increase the probability of a wage-price spiral that will lead to permanently higher inflation.
China moves to annex Taiwan, forcing a sudden global decoupling
A direct conflict between China and Taiwan is unlikely in 2024-25, owing to the risks to all those
involved. Nonetheless, there will be periods of heightened tension, and Taiwan's January 2024 elections
may serve as a spark if China views the result as making its goal of unification appear ever more distant.
Regardless of its trigger, a military conflict would weigh heavily on Taiwan's economy and cause extreme
disruption to global industry given the reliance on the island's cutting-edge semiconductor sector and its
position in regional shipping routes. A cross-Strait war would probably result in the US military
becoming involved in the defence of Taiwan, with differing forms of support also coming from US
regional allies such as Australia, South Korea and Japan, and prompt the EU and other US-aligned
governments to impose trade and investment restrictions on China. Nuclear escalation would be a risk.
Third markets (and companies) elsewhere would be forced to "choose" between China and Western
economies. In retaliation, China could block exports of raw materials and goods that are crucial to
Western economies, like rare earths.
A change in the US administration leads to abrupt foreign policy shifts, straining

alliances
The administration of the US president, Joe Biden, a Democrat, has been supportive of the US presence in
multilateral institutions, engaged strongly with key security and economic partners, and positioned the
US as a serious actor in addressing climate change. If a Republican-led administration takes over
following the 2024 elections, it would lead to abrupt foreign policy shifts in these areas. A new
administration could hold up global efforts to curb greenhouse gas emissions, step back from support
for long-standing alliances, and abruptly reduce or withdraw US financial and military support for
Ukraine, strengthening Russia's position in the war. This would stoke tensions with US allies, notably
the EU, the UK, Australia and Japan. A general rise in volatility in US foreign policy could erode
confidence in the country's ability to set long-term policies, and therefore its reliability as a partner. In
parallel, China would probably try to benefit from tensions by seeking to dissuade US partners from
following US policies towards China.
Oil spills in the Arctic create a major environmental incident, stoking global
tensions
Global warming has improved navigation conditions in the Arctic region during the summer and
autumn months, opening up the region's potential as an alternative Eurasian trade route. Since 2023
Russia has increased the frequency of its oil and liquefied natural gas (LNG) tankers sailing for Asian
markets via the Northern Sea Route across the Arctic. However, owing to the limited availability of ice-
class tankers, Russia has started to use tankers that are not reinforced for icy conditions, sometimes
even without an icebreaker escort in warmer months, raising the risk of oil spills. Owing to the Northern
Sea Route's remoteness, spills will be difficult to contain and support forces will be slow to arrive. The
fragile local environment and biodiversity will take longer to recover from damage, as low temperatures
will slow the biodegradation process of spilled oil. Any spill in the region would further intensify
tensions between Russia and Western governments, obstructing multilateral efforts to mitigate
environmental damage. New sanctions on Russian oil and LNG are likely to be imposed, and trade
through the Northern Sea Route will come under tighter international scrutiny.
Monetary policy tightening extends deep into 2024, leading to a global recession
In 2022-23 major central banks responded to high inflation by raising interest rates and by starting to
reduce the size of their balance sheets. We believe that monetary policy tightening has now broadly
ended. However, there is a moderate risk that inflation will accelerate again in 2024, driven by factors
including surprising firmness in global demand (as labour markets remain tight) or an upswing in key
commodity prices due to supply shortages (potentially linked to conflict). This could push central banks
to keep tightening in 2024, raising interest rates to levels that would be likely to lead to a much more
significant slump in consumer and investment demand. In emerging markets, higher than expected
interest rates could also cause fresh currency depreciations, further increasing inflation and weighing
on growth. Meanwhile, in major developed countries, the reduction of central banks' balance sheets
could result in a sharp sell-off in the sovereign bond market and increase risk premiums in 2024. This
could lead to a widespread asset-price crash, prompting a global recession.
Stimulus policy failures in China lead to increased state controls and diminished
growth
China's sluggish response to covid-19 shocks and the post-pandemic slowdown has shaken confidence
in the government's ability to guide markets. The government, should it be faced with an economic
recession, could opt for a big-bang stimulus rather than more subtle mechanisms to stabilise the
economy and markets. Expansive measures could involve experimental helicopter money, monetary
easing, property developer bail-outs, or easing housing purchase restrictions in first-tier cities that run
the risk of reinflating asset bubbles and encouraging speculation or precipitating capital flight. The
public criticism that would probably ensue from this approach, such as from wage earners that do not
see the benefits of stimulus, might push the ruling Chinese Communist Party to move away from the
market economy and assert more direct state controls. This could involve reintroducing strict price
controls on essential goods or nationalising the housing sector after a renewed deleveraging effort. The
damage to private-sector confidence would be significant, economic productivity would be diminished
and China's growth potential would be lowered, curbing global prospects.
The Israel-Hamas war escalates into a regional conflict

If Israel's war with Hamas expands into a full-scale military operation in the West Bank, or a prolonged
occupation of Gaza by Israeli forces causes an uprising among Palestinians, other state and non-state
actors may become involved in sympathy with the Palestinian cause. We assess the likelihood of Iran
getting directly involved in the war as slim, but the country could use its heavy influence on proxies such
as Hizbullah in Lebanon to prolong and expand the scale of the conflict. Evidence of Iranian involvement
would lead to countermeasures from Israel, turning the conflict into a regional one and widening its
economic and geopolitical impact. In an already tight oil market, disruption to oil production and
shipping from the Middle East would increase international oil prices significantly, further prolonging
cost-of-living pressures, particularly for oil-importing emerging economies. A regional conflict in the
Middle East would also draw in external powers, potentially exacerbating tensions between the US and
its allies on the one hand, and China and Russia on the other.
Artificial intelligence disrupts elections and undermines trust in political

institutions
Global firms and governments have rapidly begun to test and integrate generative artificial intelligence
(AI) into existing platforms and processes. We believe that AI will augment (rather than replace) human
capabilities, presenting an opportunity for firms to improve productivity. However, the widespread
adoption of AI and its use in social media increases the likelihood of a rise in disinformation campaigns
via text, imagery, audio and video in the coming years. Regulation across different geographies is
coming, but malicious actors will still look to implement wide-ranging programmes aimed at fuelling
existing scepticism of some citizens towards governments. This could shift the result of major elections
scheduled for 2024—including for the European Parliament, and in the US, the UK, India and Taiwan—
and more broadly erode voters' trust in political systems.
Commodity prices
World | Economy | Forecast | Commodity prices
January 1st 2024
Commodity price forecasts

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Oil prices
Brent; US$/barrel 64.0 42.3 70.4 99.8 82.8 79.7 74.9 70.0 65.7 62.4
Non-oil commoditiesa
Total -6.3 2.9 37.9 14.7 -15.0 -2.0 1.0 0.1 0.7 1.1
Food, feedstuffs & beverages -4.3 7.8 36.1 22.2 -16.9 -5.2 -4.0 -0.8 -0.7 -0.7
Beverages -4.9 6.4 19.3 16.3 -4.1 8.6 -9.3 0.8 1.3 1.3
Grains -5.0 6.8 38.5 30.0 -21.4 -11.5 -0.7 -1.3 -1.3 -1.3
Oilseeds -3.3 11.2 43.9 15.3 -21.0 -6.0 -3.2 0.1 -0.2 -0.2
Sugar 1.6 1.1 37.6 4.7 30.0 6.0 -15.0 -9.4 -9.4 -9.4
Industrial raw materials -8.6 -3.2 40.4 4.6 -12.0 3.0 8.0 1.2 2.4 3.3
Metals -10.3 -2.4 48.4 2.7 -11.4 3.6 10.7 1.5 3.1 4.2
Fibres -8.1 -5.2 18.9 15.9 -16.1 -2.5 -2.7 -0.3 -0.3 -0.3
Rubber 6.1 -5.2 25.5 -2.5 -7.0 9.7 5.9 1.6 1.6 1.6
a % change in US dollar prices.
Source: EIU.
Diverging trends for commodities prices in 2024-25

EIU expects prices for most industrial raw materials, especially base metals, to rise in 2024, helped by
moderate stimulus for China's property sector. An acceleration in global demand growth, especially for
metals that are key components in the green transition, will lift prices even more sharply in 2025. Prices
for agricultural commodities will resume a broad downward trend from 2025, owing to higher
production and the end of the El Niño climate pattern. We expect hydrocarbon prices to trend broadly
downwards over the forecast period.
Oil prices will average about US$80/barrel in 2024

The global oil market is set to remain fairly tight in 2024. Prices (dated Brent Blend) fell below
US$80/barrel in early December despite OPEC+ confirming reduced production quotas in 2024 and
additional voluntary cuts by Saudi Arabia and Russia. The US has ramped up production and exports,
which has contributed to recent price falls, and will continue to do so even though Saudi Arabia is
unlikely to increase output markedly in 2024. However, after hitting an all-time high in 2023, global oil
demand is set to reach record highs in 2024 and subsequent years as consumption in the developing
world continues to increase. This limits the downside to oil price forecasts.
Geopolitics means volatility in oil prices will persist

The market will remain largely data-dependent as traders look for signs of whether energy demand
growth is holding up in an environment where interest rates remain higher for longer. Stock data
(particularly in the US, where the strategic petroleum reserve has fallen to a 40-year low) will also loom
large in traders' minds, especially if governments take advantage of lower prices to rebuild stocks.
Heightened geopolitical risks tied to the Israel-Hamas war still threaten to cause prices to soar again. We
therefore expect prices to remain volatile and to mostly trade in a wide range around US$80/b.
The energy transition will push oil prices lower in the long term
Prices will trend downwards more significantly from 2025, owing to permanent demand destruction in
OECD countries, particularly in Europe, and slowing demand growth in the developing world. A more
concerted effort to transition away from hydrocarbons will push oil prices below US$70/b by 2027.
Geopolitics has caused a bigger rise in gas prices

Geopolitics are having more of an effect on European natural gas prices, but these effects should start to
diminish by the second quarter of 2024. This is based on our assumption that the Israel-Hamas war will
neither disrupt supplies nor expand into a regional conflict. Such concerns sent European gas prices
soaring in October owing to disruption to Egypt's exports of liquefied natural gas (LNG), even though
these will have only a negligible impact on global LNG supplies. European prices were already set to
increase in late 2023 and early 2024 as utilities started to draw down regional stocks ahead of Europe's
2023/24 winter season. LNG deliveries, which have largely filled the gap left by Russia since mid-2022,
are increasingly costly in the light of high crude oil prices and are also affected by geopolitical concerns.
Natural gas prices will resume a downward trend by 2025

We expect European gas prices to decline more sharply in 2025 amid still subdued demand and increased
supply, whereas US prices will be boosted from 2024 owing to steady growth in US exports of LNG. The
downside to LNG contract prices will remain limited in 2024, but we expect a more significant fall in
prices in 2025 owing to the expected decline in oil prices and changes written into new LNG contracts
and renewals.
Industrial raw materials prices will rise in 2024-25

Hard commodities: We expect the industrial raw materials (IRM) price index to trend upwards from the
beginning of 2024 until 2025. Recovering demand in China and still-strong demand in Asia generally
will boost prices for most base metals in 2024, especially aluminium. The central role of copper and
nickel in the green transition means that their prices will accelerate strongly, especially from 2025.
El Niño will limit food price deflation in 2024

Soft commodities: We forecast that the food, feedstuffs and beverages (FFB) index will broadly stabilise
at current levels in 2024, before increasing production volumes and the end of El Niño lead to modest
declines in 2025-28. Despite Russia's withdrawal from the Black Sea Grain Initiative, prices for grains will
broadly stabilise at current levels in 2024-25, but oilseeds prices will continue to decrease slowly. Prices
for cocoa, Arabica coffee and tea are set to increase in 2024, owing to El Niño, before easing from 2025.
India's ban on exports of non-basmati rice will keep global prices well above the historical average in
2024-25. Our FFB index will remain about a tenth higher than its pre-pandemic 10-year average even
in 2028.
Consumer goods
World | Consumer goods | Overview
April 1st 2023
(Forecast closing date: April 1st 2023)

The consumer goods and retail industry has suffered multiple setbacks in recent years, including the
covid-19 pandemic, supply-chain disruptions and Russia's invasion of Ukraine. All these events have
contributed to decades-high inflation in most major Western markets, forcing central banks to raise
interest rates and dampening macroeconomic prospects and consumer spending.
Despite these headwinds, consumer spending appears to have held up better than expected so far this
year in most markets, partly owing to savings accumulated in 2020-21, government support for energy
prices (in some cases) and a strong labour market. However, the household savings rate has been falling
rapidly in most rich markets as wage growth is slowing. EIU expects real growth in retail sales of 1.4% in
2023, slower than in 2021-22, as several major Western markets remain on track to post flat volumes or a
decline. The major growth momentum will come from the Middle East and Asia, with retail markets such
as in India and China bouncing back from the pandemic lows.
With global consumer inflation forecast at 6.7% in 2023 (following a rate of 9.3% in 2022), we expect
consumers' purchasing power to remain under considerable pressure this year as businesses continue to
pass through higher costs. Even as the global commodity rally slows, businesses will face profitability
pressures. At the same time these companies, especially retailers, are likely to keep up spending on new
technologies.
World: consumer goods and retail industrya

2018b 2019b 2020b 2021b 2022b 2023c 2024c 2025c 2026c 2027c
World retail sales
Retail sales (US$ trn) 19.5 20.0 19.7 22.1 22.2 23.2 24.5 26.0 27.5 29.0
Retail sales volumes (% change) 9.6 -0.5 -3.3 3.9 1.8 1.4 2.5 2.5 2.5 2.4
Food sales (US$ trn) 9.2 9.4 9.7 10.8 10.9 11.4 12.1 12.8 13.5 14.3
Non-food sales (US$ trn) 10.3 10.5 10.0 11.3 11.3 11.7 12.4 13.1 13.9 14.7
Consumer price inflation (av; %) 7.0 6.0 4.3 5.5 8.0 6.4 3.7 3.1 3.0 2.9
Consumer expenditure (US$trn)
Total 44.7 45.5 43.4 48.9 50.8 53.8 56.7 59.8 63.1 66.3
% change 5.7 1.7 -4.6 12.8 3.8 5.8 5.5 5.4 5.5 5.1
Food, beverages & tobacco 8.1 8.3 8.3 9.3 9.9 10.6 11.1 11.7 12.2 12.8
% change 5.0 2.4 -0.2 12.4 5.9 6.9 5.2 4.9 4.9 4.6
Clothing & footwear 2.1 2.1 1.9 2.1 2.0 2.1 2.2 2.3 2.4 2.5
% change 4.8 0.2 -11.0 11.6 -1.6 3.8 5.0 4.5 4.6 4.2
Household goods & services 2.1 2.2 2.2 2.4 2.4 2.4 2.5 2.7 2.8 2.9
% change 6.1 1.8 1.3 11.7 -2.6 2.9 4.3 4.5 4.7 4.1
Hotels & restaurants 2.7 2.7 2.0 2.3 2.5 2.6 2.8 2.9 3.1 3.3
% change 5.7 1.9 -25.6 14.7 6.7 6.0 6.5 6.1 6.2 5.4
a Sum of 60 countries covered in EIU's industry service. b EIU estimates. c EIU forecasts.
Source: EIU.
The Russia-Ukraine war had raised the spectre of food insecurity, even though a trade deal brokered by
the UN and Turkey has helped to lower prices for now. We expect the food, feedstuffs and beverages (FFB)
price index to decline by 10.5% in 2023 (after rising by nearly 22% in 2022). Nevertheless, with increasing
instances of erratic weather conditions, food security will be a cause for concern for many countries over
the forecast period.
EIU
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world. We combine data, analysis and forecasting to guide informed decisions by businesses and policymakers.
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24. 1. 13.

One-click report : World

1.2 Global forecast data

2.2 Exchange rates

2.3 Trade and external sector

2.4 Risk scenarios

2.5 Commodity prices

One-click report : World

January 1st 2024

Global forecast data

January 1st 2024

(Forecast closing date: December 12th 2023)

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

Monthly global overview

January 1st 2024

(Forecast closing date: December 12th 2023)

Geopolitical shocks are weighing on the economic outlook

Global growth will be sedate but not recessionary

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

Disinflation is forecast to continue, with risks weighted to the upside

Monetary tightening is over, but there will be caution on loosening

Emerging markets and green industries lead global growth opportunities

Fragmentation and regionalisation will define politics and policymaking

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

January 1st 2024

The euro will appreciate, but sterling will struggle

Control of inflation will help to drive emerging-market currency gains

The role of the US dollar will not be disrupted

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

Trade and external sector

January 1st 2024

Growth in global goods trade will begin to rebound in early 2024

Outlook for global services trade is more positive

Climate change and environmental concerns are influencing trade

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

Industrial policy will lead to frictions

Additional US-China trade actions are coming

EU-China trade frictions will intensify

Supply-chain diversification will be selective rather than en masse

Reshoring will reform, rather than reshape, global trade

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

January 1st 2024

A green technology subsidy race becomes a global trade war

Industrial action spreads, disrupting global productivity

China moves to annex Taiwan, forcing a sudden global decoupling

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

A change in the US administration leads to abrupt foreign policy shifts, straining

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

The Israel-Hamas war escalates into a regional conflict

Artificial intelligence disrupts elections and undermines trust in political

https://viewpoint.eiu.com ©Economist Intelligence Unit Limited 2023

January 1st 2024

Commodity price forecasts

Diverging trends for commodities prices in 2024-25

Oil prices will average about US$80/barrel in 2024

Geopolitics means volatility in oil prices will persist