2024 Economic Outlook

• Despite their better-than-expected performance in 2023, many of the world’s major economies appear likely to experience lackluster growth in 2024, amid still tight monetary policy and inflation rates that, while slowing, remain above target. Projections from the IMF point to a marginal slowdown in global growth, falling from a forecast of 3.0% in 2023 to 2.9% in 2024. Within that, advanced economies are forecast to fare poorly with an expected expansion of just 1.4% in 2024. While emerging markets, underpinned by solid growth in India, are projected to perform better, with growth of 4.0% expected in both 2023 and 2024.
• Headline inflation rates in advanced economies should continue to move lower, but central banks will, however, remain wary of cutting rates too early. We expect that the FOMC will be the first to move, and forecast three 25bps cuts from mid-2024, taking the upper bound to 4.75% at year-end. We also expect 75bps worth of cuts from the ECB, starting in the second half of 2024. We anticipate that the BoE will, similarly, be in a position to start easing in the latter part of 2024, with two 25bps cuts by end 2024.
• Oil markets will record a modest surplus on average in 2024 as demand growth slows from a very strong 2023. Supply growth will be led by countries outside of the OPEC+ framework while some members of the producers’ alliance have agreed to deeper cuts in Q1. We expect Brent prices at an average of about USD 83/b in 2024, roughly where they were in 2023.
• The GCC was not immune to the weaker global backdrop, with headline GDP estimated at just 0.5% in 2023 from 7.6% in 2022. However, this largely reflected significant cuts to oil production over the course of last year, particularly from Saudi Arabia, and non-oil growth was much more resilient at 3.7% for the region in 2023 (on a nominal GDP weighted basis), down from 5.3% in 2022.
• Population growth helped to support consumption growth across the GCC in 2023, as economic and visa reforms drew expatriate workers to the region. We expect this trend to continue in 2024, albeit at a slower pace. Government investment spending was also a key driver of growth as is expected to continue this year as the region looks to meet ambitious development and economic diversification targets by the end of the decade. We forecast non-oil growth of 3.6% on average across the GCC in 2024. Extended oil production cuts will weigh on headline GDP growth however, with the latter forecast at 1.5% this year.
• Conditions appear favouable for GCC credit in 2024 as monetary policy begins to ease from mid-way through the year. Smaller surpluses or modest fiscal deficits among sovereigns should mean a healthy pattern of issuance in 2024. One risk for the GCC remains the relatively tight spreads in its credit markets thanks to generally higher credit rating than among many emerging market peers.

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