Economies and cities across many parts of the world will see subdued growth with higher-for-longer interest rates and geopolitical uncertainties controlling consumption, investment, manufacturing and trade, according to a Euromonitor International expert.
Lan Ha, Head of Economies Research at Euromonitor International, said that on the brighter side easing commodity prices and inflation will give some breathing room for companies and households.
Also, while global manufacturing is set to slow down, some markets and sectors could witness growing opportunities, driven by manufacturers’ efforts to diversify locations.
Ha said that while interest rate hikes might have peaked in 2023, borrowing costs are expected to stay elevated throughout 2024, creating a new financial landscape for businesses and consumers alike.
“Persistent high interest rates will not only limit access to finance and impede business investment but also elevate the cost of servicing existing debts. In the coming year, companies must focus on improving productivity and implementing cost-effective management strategies to safeguard their financial health.”
Rising debt burden will curb consumer spending but emerging cities poised for growth
Aleksandra Svidler, Economies Consultant at Euromonitor International, said that although inflationary pressures are gradually easing, consumers remain cautious about spending. As surging mortgage rates and borrowing costs, along with the anticipated softening of labour markets, put further strain on household budgets, consumers will continue to prioritise essential spending.
“The expected real growth in per capita urban spending in North America is projected to moderate to 0.3% in 2024 from 1.4% in 2023. Throughout the region, Vancouver, Calgary and Toronto are expected to experience notable impact, as Canadian consumers continue to grapple with some of the highest household debt levels globally.
“Any emerging urban areas, especially in Asia Pacific, continue to offer consumption potential amid more resilient economic development and solid demand-side growth.
“Bangkok in Thailand, Manila in the Philippines and Ho Chi Minh City in Vietnam are poised to see some of the strongest growth rates in real consumer spending in 2024 among other tier 1 cities globally.”
Geopolitical risks increase uncertainty in the global commodity markets
Following a sharp year-on-year contraction during 2023, commodity prices are expected to ease further in 2024 because of the anticipated slowdown in global economic growth.
Svidler said: “Tight financial conditions, affecting both private consumption and business investment, are likely to contribute to weaker global demand and trade, curbing commodity price growth.
“Despite these expectations, commodity markets will be characterised by heightened uncertainty and volatility in 2024 due to rising geopolitical risks, intensifying climate change effects and extreme weather events.
“Any escalation of the current geopolitical events, along with oil supply regulations like voluntary output cuts by OPEC+, could exacerbate volatility in global energy supply and prices.
“Severe weather events associated with climate change and the intensifying El Niño weather pattern could threaten global agrifood supplies and escalate energy demand for heating and cooling, increasing pressure on food and energy commodity prices.”
Global manufacturing faces challenges but reshoring initiatives offer opportunities
The global manufacturing sector is forecast to show slower growth of 2.1% in real terms in 2024, down from 2.6% in 2023.
Justinas Liuima, Industrial Insights Manager at Euromonitor International, said that slower global economic growth and consequently stalling demand for B2B goods will drag down the manufacturing sector’s performance.
“Manufacturers will continue to face problems in the labour market, potential trade restrictions and stricter environmental regulations that will add to the slower growth.
“Nevertheless, reshoring of manufacturing operations will provide new growth opportunities in 2024, especially in developed economies. The high-tech goods sector is forecast to lead the transformation of the production networks in 2024 and, in turn, support B2B demand for various goods and services, ranging from input components to construction services.”