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1/17/2024 6:27:59 AM

A pessimist's guide to global economic risks in 2024

It's the year of the soft landing—and of interest-rate cuts that will support growth and markets around the world. So runs the upbeat conventional wisdom about the global economy in 2024.

What could possibly go wrong? After years marked by war, pandemic and bank collapse, it hardly needs saying: a lot. That includes—but is not limited to—the following.

The Middle East Is On the Brink

After more than three months, Israel's war in Gaza has brought the region to the brink of a wider conflict with the potential to choke off oil flows, take a chunk out of global growth, and push inflation higher again. That kind of energy-supply disruption hasn't happened yet, and markets are betting it won't. But the risk is rising.

Tensions have escalated in the Red Sea since the US and UK launched airstrikes in Yemen, a response to weeks of attacks by Houthi militants on vessels in a key gateway for global commerce. Daily exchanges of fire along the Israel-Lebanon border, and the assassination of a Hamas leader in Beirut, risk drawing Hezbollah — and consequently Iran — deeper into the fighting. Iraq and Syria increasingly look like flashpoints too.

Our base case remains that a direct Iran-Israel war is unlikely. If that extreme scenario did materialize then one-fifth of global crude supply, as well as important trade routes, could be at risk. Crude prices could surge to $150 per barrel, shaving about 1 percentage point off global GDP and adding 1.2 percentage points to global inflation.

The Fed Could Get Burned (Again)...

That would be bad news for the Federal Reserve, and for investors betting on an early and aggressive pivot to rate cuts.

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India targets net-zero carbon emissions by 2070, says Modi

India’s economy will become carbon neutral by the year 2070, the country’s prime minster has announced at the COP26 climate crisis summit in Glasgow. The target date is two decades beyond what scientists say is needed to avert catastrophic climate impacts. India is the last of the world’s major carbon polluters to announce a net-zero target, with China saying it would reach that goal in 2060, and the United States and the European Union aiming for 2050.

COP26: What climate summit means for one woman in Bangladesh

China's carbon emissions are vast and growing, dwarfing those of other countries. Experts agree that without big reductions in China's emissions, the world cannot win the fight against climate change. In 2020, China's President Xi Jinping said his country would aim for its emissions to reach their highest point before 2030 and for carbon neutrality before 2060. His statement has now been confirmed as China's official position ahead of the COP26 global climate summit in Glasgow. But China has not said exactly how these goals will be achieved.

Why China's climate policy matters to us all

Deliver on promises, developing world tells rich at climate talks

A crucial U.N. conference heard calls on its first day for the world's major economies to keep their promises of financial help to address the climate crisis, while big polluters India and Brazil made new commitments to cut emissions. World leaders, environmental experts and activists all pleaded for decisive action to halt the global warming which threatens the future of the planet at the start of the two-week COP26 summit in the Scottish city of Glasgow on Monday. The task facing negotiators was made even more daunting by the failure of the Group of 20 major industrial nations to agree ambitious new commitments at the weekend.