The U.S. economy has long been seen as the primary driver of global growth, but recent concerns have raised doubts about its ability to continue in this role. Economist Mohamed El Erian recently shared his thoughts on the matter, highlighting three critical factors that will determine the U.S. economy’s ability to drive global growth in 2024.
In his article, El Erian pointed out the importance of the domestic economy’s capacity to sustain its growth momentum, its resilience in the face of domestic political divisions and global uncertainties, and whether investors can secure enough liquidity to refinance debts accumulated during periods of low-interest rates and high liquidity injections by central banks.
While El Erian acknowledged the dynamic growth engines of the U.S. economy and measures taken to foster future growth, he also highlighted the challenges it faces. These include weaker household balance sheets, the risk of a monetary-policy mistake by the Federal Reserve, and domestic and geopolitical uncertainties.
El Erian estimated a 55% probability of a soft landing for the U.S. economy, a 30% likelihood of a recession, and a 15% chance of surprise growth due to transformational innovations. Despite optimistic forecasts, concerns about a potential slowdown in the economy have been raised, with some experts expressing caution about the possibility of a recession in 2024.
While Ark Invest predicts a potential 7% annual GDP growth, the fourth-quarter economic growth of 3.3% was slower than the previous quarter, indicating a potential slowdown. Deutsche Bank no longer expects a recession in 2024, but JPMorgan CEO Jamie Dimon has expressed concerns about a potential downturn. Additionally, a recent survey revealed that 25% of business economists and analysts predict a U.S. recession in 2024, likely triggered by external factors such as a conflict involving China.
The U.S. economy’s position as the primary driver of global growth is being questioned, and the coming year will be crucial in determining its ability to continue in this role. As uncertainties and challenges persist, it remains to be seen how the U.S. economy will navigate the changing economic landscape and drive global growth in 2024.
