In 2024, after inflation, the risk of recession

This is perhaps the one fact about which economists have no doubt – but no hold either: in 2024, the number one risk for the economy will be… geopolitics

In 2024, after inflation, the risk of recession

This is perhaps the one fact about which economists have no doubt – but no hold either: in 2024, the number one risk for the economy will be… geopolitics. The aftermath of the war led by Russia in Ukraine, the possible extension of the conflict between Israel and Hamas, the continuation or not of the unrest in the Red Sea will weigh in the economic equations. To which must be added the series of major elections which will punctuate the calendar. “Next year, 60% of global GDP will be affected by elections, and no region will be spared,” note the economists at Allianz Trade.

If the European elections in June are already on people's minds, we will also have to take into account the legislative elections in India and the United Kingdom. But above all, two presidential elections could have decisive consequences for the rest of the world: that of Taiwan, in January, then in November the supreme election in the United States. “These political uncertainties could freeze households and businesses into a wait-and-see attitude, at the risk of a year without momentum,” analyzes Ludovic Subran, chief economist at Allianz. In addition, new political shifts, such as that marked by the arrival of populist Javier Milei in Argentina in December, are not excluded in certain countries.

At the start of 2023, many economists judged that due to the rise in Federal Reserve (Fed) rates and therefore credit costs, a recession was inevitable in the United States. They were wrong: the American economy has held up surprisingly well, in particular thanks to the good performance of the labor market and massive budgetary support from the Biden administration. “In the coming months, the country should experience a soft landing,” estimates Gilles Moëc, chief economist at Axa. According to the International Monetary Fund (IMF), American gross domestic product (GDP) is expected to grow by 1.5% in 2024, after 2.1% in 2023.

The picture is a little less encouraging on this side of the Atlantic. The euro zone should grow by 0.3% to 0.8%, according to the different institutes, including 0.6% to 0.8% for France, and little more than 0.6% for Germany. “The question of the year will be whether or not Europe will escape recession,” summarizes Mr. Subran. Many member states are expected to limit their public spending to comply with European budgetary rules, which will weigh on activity. “They also risk slowing down investments essential to green industry, and further widening our gap with the United States in this area,” underlines Philippe Waechter, chief economist at Ostrum Asset Management.