Head of Macroeconomic Analysis at BBVA Research, Rafael Domenech, highlighted that in macroeconomic terms, The global economy is expected to grow again by about 3% in 2024. However, he highlighted that since the second half of 2023, a certain slowdown has been observed in advanced economies such as China or the United States. In fact, for 2024, the research service forecasts growth of 4.4% and 1.5% respectively, which will be offset by a slight improvement in the euro area and greater growth in other emerging economies.
In this sense, we will have to get used to it in the long term, stressed Director of Global Strategy at BBVA Asset Management & Global Wealth, Joaquín García Huerga. to 'tepid growth' Of these economies, because demographics will determine that the working age population will be smaller in many developed countries and even in some emerging countries. Moreover, we have seen little productivity gains in most economies for years. Although it is likely that the use of AI will be able to increase the said productivity and thus improve economic growth. Garcia Huerga pointed out that the long-term speed of acceleration for the US economy is 2% and the euro area is 1%.
Chief Economist for Economic and Financial Analysis at BBVA Research, Sonsoles Castillo, highlighted that inflation developed positively in 2023, after falling in the United States and Europe between three and four percentage points. The expert stated that this is positive news, however Still far from central banks' 2% target. This reduction is expected to continue by 2024, although convergence to 2% may take some time. Sonsoles Castillo has emphasized that we must be attentive to this potential new supply shocks, as bottlenecks re-emerge; As well as the development of salaries and the withdrawal of financial procedures.
Likewise, BBVA's head of private banking analysis and strategy, Alvaro Manteca, added that in the coming years we are likely to have to live with a higher inflation regime than that of past decades, partly due to market tension. The employment and physical impacts of climate change, which have put upward pressure on the prices of some agricultural raw materials.
Regarding interest rates, Sonsoles Castillo explained that they have reached their maximum in this cycle, so it is very likely that they will be reduced this year. However, the onset, pace, and amount of declines will depend on the data. BBVA Research estimates that central banks will be cautious, so interest rates could be cut around May/June and the pace of cuts will be gradual, compared to more aggressive market expectations.
Change in financial and risk policy for 2024
The head of private banking markets at BBVA, Roberto Hernanz, pointed out that the expansionary financial policy that has occurred in recent years, since the outbreak of the Corona virus, This has led to inconsistency with monetary policy. This fiscal policy helped mitigate the impact of the crisis, but it also led to higher debt levels in countries in recent years.
For this reason, with the crisis over and the inflation rate remaining above the level targeted by central banks, it is time to return to budget stability and achieve financial stability. Ensuring the long-term sustainability of public accountsHernanz explained. Along these lines, Rafael Domenech also stated that the new fiscal rules proposed by the European Commission will help gradually reduce the public deficit. However, in countries like the United States (with a fiscal deficit approaching 8% in 2023 and an unemployment rate at a minimum) The financial adjustment will be more complex, Especially since we are in an election year.
On the other hand, Rafael Domenech explained the main economic risks facing 2024. The most obvious is inflation, “And it has not yet traveled the last mile to reach levels consistent with the goals of central banks.” At the same time, though Interest rates start to fall in 2024 They will remain high and it is important to see how those economies, sectors or companies with the most debt behave. Finally, we will have to take into account the slowdown of the Chinese economy in specific sectors such as real estate.
Sonsólis Castillo added that besides macroeconomic risks, geopolitical tensions will remain present. In addition, the year 2024 will be the year of many elections, such as those taking place in the United States, the European Parliament, and in many other countries with geopolitical derivatives, such as Russia and Turkey, or those already held in Taiwan, which constitute first-class elections. The geopolitical event and its impact on Sino-American relations.
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