In the complex tapestry of global events, the art of forecasting is dicey at best, yet the value lies in offering a path to preparedness. And while the coming year is likely to be as full of surprises as the last few, there are at least six major geopolitical and economic challenges that the world will face in 2024, the likes of which demand preparation and forethought.
To that end, in a new three-part blog series, each covering two of these major challenges, we will offer business professionals and governments the insight to better navigate what 2024 may have in store.
Challenge 1: Democracy under attack
Democracy, the system of government that allows people to choose their leaders and hold them accountable, is facing multiple threats and pressures around the world. While this has been a years-long development, 2024 will be a particularly straining year, as more than 50 countries and regional bodies are experiencing major elections in the upcoming year, with four in particular that could have significant global impacts.
One of the most watched and consequential elections will be the presidential race in the United States, where incumbent Joe Biden will seek a second term against a (highly likely) challenge from former president Donald Trump, who has refused to concede his defeat in 2020. It will be a decisive moment for the future of American democracy, which has been eroded by partisan polarization, misinformation, voter suppression, and attacks on the integrity of the electoral system.
Another key election will be in India, the world’s largest democracy, where Prime Minister Narendra Modi will seek a third term in office. Modi, who leads the Hindu nationalist Bharatiya Janata Party, has been accused of undermining India’s secular and pluralistic traditions, cracking down on dissent, and enacting controversial laws that discriminate against Muslims and other minorities. An effort by the government to monitor fake news on social media — a possible avenue towards extensive censorship in a democracy already struggling with diversity — has only generated further concerns. Modi’s popularity, however, remains high among his supporters, who credit him with delivering economic growth, fighting corruption, and standing up to China and Pakistan. The 2024 Indian election will determine whether Modi can consolidate his power and agenda, or whether the opposition parties can mount an effective challenge and offer an alternative vision for the country.
The impact of these elections on geopolitics, global business, and society will be enormous, potentially shaping the policies and priorities of some of the world’s largest and most influential economies.
Other elections will also have important ramifications for the region and the world, as they will reflect the state of democracy and governance in their respective countries, as well as their relations with other powers. For instance, Taiwan will continue to be a flashpoint for US-China relations, as the island which China sees as its sovereign territory prepares for a democratic election in mid-January. Outgoing president Tsai Ing-wen’s Democratic Progressive Party seeks to defend her pro-independence stance and resist pressure from Beijing and the opposition party, the Kuomintang, in an election where interference from China is expected.
The election in Indonesia, the world’s largest Muslim-majority country and a rising economic power, will be a test of its democratic resilience and its role in Southeast Asia. The outgoing President Joko Widodo, who has served as the nation’s president since 2014, will be stepping aside as he reaches his term limit. His legacy may continue through the candidacy of his Defense Minister Prabowo Subianto, whose vice-presidential running mate is Gibran Rakabuming Raka, the eldest son of President Widodo. Indonesia, for all of its growing power is a very young and thus relatively untested democracy, and it will have an important decision to make for Joko Widodo’s successor in an election already generating controversy on all sides.
The impact of these elections on geopolitics, global business, and society will be enormous, potentially shaping the policies and priorities of some of the world’s largest and most influential economies. Alliances, trade agreements, and joint ventures are all dependent on the outcomes of these elections and what they say collectively about a prominent style of government.
Given the significance of these elections, it is crucial for business leaders to monitor and understand the political dynamics in these countries, as well as how they will affect the regional and global landscape. A proactive and informed approach to engaging with these democracies will not only help businesses mitigate the risks and uncertainties, but also allow them to seize the opportunities that these events offer.
Challenge 2: A fracturing global economy
Four years after the outbreak of the global pandemic, the international economy remains fragile and uncertain. The pandemic exposed and exacerbated the structural weaknesses and vulnerabilities of an interconnected global economy, one which is beginning to splinter into rival blocs. While potentially in only its early stages, the off shoring, re-shoring, and all-around realignment of global trade between these blocs is going to have a major impact on the world. Supply chains will be reshaped, relationships between companies will have to adapt, and new competitions will undoubtably emerge.
A core challenge facing the global economy going into 2024 continues to be, of course, inflation. In 2024, the inflation rate likely will fluctuate across countries and regions, depending on their economic conditions, policy responses, and external shocks. According to the International Monetary Fund (IMF), the global inflation rate is projected to be 5.8% in 2024, with core inflation not expected to return to target levels of around 2% until 2025. However, this global average masks significant differences among countries and regions. For instance, advanced economies are expected to see inflation of less than 3.0% in 2024, after averaging 4.6% in 2023. (Note: The 2023 figures are IMF projections for the full year given three quarters of data. Final growth figures for 2023 may deviate slightly from these projections.)
In light of this, the United States is actually seeing some of the lowest inflation numbers across the globe, but that is counterbalanced by a weak Eurozone and an especially sickly United Kingdom.
The inflation dynamic in 2024 will have important implications for the global economy, as it will affect exchange rates, interest rates, asset prices, income distribution, and the debt sustainability of many countries and regions.
Emerging market and developing economies, however, are expected to see 7.8% inflation on-top of the 8.5% inflation they saw in 2023, a significant struggle for nations that were already harder hit by the pandemic. Indeed, some countries such as Argentina, Turkey, and Egypt experiencing inflation at double- and even triple-digit rates.
The inflation dynamic in 2024 will have important implications for the global economy, as it will affect exchange rates, interest rates, asset prices, income distribution, and the debt sustainability of many countries and regions. It will also pose challenges and opportunities for businesses and professionals, which will have to adapt to the changing price levels and expectations while managing the associated risks and uncertainties.
Add to this worrisome economic picture the slowdown in China, the world’s second-largest economy and the largest trading partner of many countries and regions. China has been the main engine of global growth for the past four decades; however, its growth model — which relies heavily on investment, exports, and debt — may have reached its limits. Now, the country is facing multiple headwinds, such as an aging population, high unemployment among younger workers, declining productivity, and environmental and real estate crises. China’s slowdown will have a cascading effecting into foreign policy and other key interest areas, the full extent of which will depend on the responses of its government to the challenge.
Meanwhile, the world’s largest economy, the United States, seems to be better off, with greater optimism among its business leaders, even if the general public remains somewhat pessimistic. With slowing inflation and a historically strong labor market helping to lift real income, the nation’s economic fundamentals appear steadier than at any time since before the pandemic. Still, the US must dodge still-latent banking and commercial real estate crises, or any other major recession trigger. Yet even then the country may still slip into an economic malaise simply because consumers have convinced themselves of its inevitability. If it remains resilient, however, a strong US economy could send positive ripples across the business and political world.
In 2024, democracy will be under stress, as authoritarian leanings will seek to make a mark in upcoming elections and populist movements challenge the established institutions. At the same time, the global economy is likely to face multiple challenges and uncertainties, as well as some opportunities for recovery and resilience.
While these are major challenges — and only two of the six largest factors we’ll be covering in this series — we have to acknowledge that unforeseen occurrences can rapidly shift the state of the world, and are in fact, becoming alarmingly common. An assassin’s bullet, a heart attack, a natural climate disaster, a war, or even another pandemic, can impact the world in ways that cannot be predicted.
As such, organization leaders need to maintain the flexibility they were forced to develop during the pandemic as part of a plan of strategic preparation to face whatever 2024 has in store.
This article was originally published by Bryce Engelland for Reuters. You can read the second part of this series here, focusing on the global competition for natural resources and artificial intelligence.
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