Global | On the path to economic normalization

The world economy outperformed expectations in 2023, especially considering the outlook in the early part of the year and the shocks it faced.

Key points

• Key points:
• Remember, just 12 months ago China was ending its zero-COVID policy, Europe was still worrying about the potential impact on energy supply of the war in Ukraine, and central banks in the leading advanced economies were in the midst of interest-rate tightening campaigns to curb still-high inflation that could push the United States and other countries into recession.
• Despite this backdrop, global growth held up largely better than expected, hovering at around 3% compared to the 2.3% forecast at the end of 2022. The United States (GDP growth of 2.4%) fared much better than Europe (0.4%) thanks to support from the labor market and accumulated savings.
• The eurozone's economy was pretty much stagnant since spring despite the resilience of the labor market. China grew 5.2% thanks to the strong rebound by the economy at the beginning of the year, before losing pace in the last three quarters.
• Looking ahead to 2024, we expect current trends to continue, with global growth broadly similar to last year (3%), the United States showing a more evident slowdown (to 1.5%), Europe gradually recovering (to 0.7%), and the Chinese economy continuing to undergo a -more structural than cyclical- extremely soft landing (4.4%).
• In short, growth, inflation and interest rates should continue to normalize toward their long-term equilibrium levels.This normalization should enable the world economy to tackle the long-term challenges it faces, whether geopolitical, energy transition or demographic.

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