Ukraine’s challenging 2024 outlook

Below is a group of forecasts for the global economy and events that will affect the world and Ukraine in particular

I have already studied more than a dozen forecasts by leading investment companies and think tanks for 2024. We need to prepare for a year that will be more difficult for Ukraine than 2023 was.

The main reasons:

– Global economic growth is slowing down (as a result, demand and prices for commodities and Ukrainian exports are falling).

– The likelihood of a reduction in military and financial assistance to Ukraine is growing, and as a result, opportunities for Russia, which is building up its military capabilities, are increasing.

– Elections in many essential foreign countries and a decreased focus on security and support for our country.

– New military conflicts in the world that will divert attention from us.

– Elections in the US and the election race will also make us a hostage.

Below is a group of predictions about the global economy and events that will affect the world and Ukraine.

1. The IMF expects a slowdown in global economic growth – 3% in 2023 and 2.9% in 2024. This is significantly lower than the historical average (2000–2019) of 3.8%.

Economic growth in developed economies: 2023 – 1,5%, 2024 – 1,4%. The slowdown is due to tightening monetary policy (higher interest rates, money remains expensive).

In developing countries: 2023 – 4%, 2024 – 4%.

Global inflation is gradually declining: 2022 – 8,7%, 2023 – 6,9%, 2024 – 5,8%.

2. JPMorgan Chase & Co. analysts have lowered their forecast for global GDP growth in 2024 to 2.5% from 3%. JPMorgan also predicts that in 2024, economic growth in the United States will slow to 2.4% from 2.7% in 2023. By mid-2024, 99% of Americans will be in a worse financial position than before the pandemic. 80% of consumers, who account for almost two–thirds of consumption, have already exhausted the entire savings cushion they could have built up during the quarantine. According to the bank, it is likely that the financial situation of all consumers, except the wealthiest 1%, will be worse in mid-2024 than before the pandemic.

JPMorgan predicts an increase in corporate profits but warns that the S&P 500 index will fall by 8% (it is important to note that other investment banks, on the contrary, expect it to grow).

According to JPMorgan, weakening consumer trends and geopolitical risks will pressure stocks.

According to JPMorgan analysts, geopolitical tensions, especially between China and the United States, remain a critical risk to the global economy in 2024.

The bank expects oil prices to remain high despite the slowdown in global economic growth. This is because oil supply is limited, and demand remains high.

The average price of Brent crude oil in 2023, 2024, and 2025 will be $81, $83, and $75 per barrel, respectively. In 2024, the global oil demand will increase by 1.6 million barrels per day due to the growth of developing economies.

JPMorgan notes that several factors could lead to a global crisis, including: a prolonged war in Ukraine, tightening of monetary policy by central banks worldwide, and rising inflation. JPMorgan expects that the probability of a global crisis in 2024 is lower than in 2023, but it remains. Central banks worldwide will continue to raise interest rates in 2024 to fight inflation. Global unemployment growth will slow in 2024 but remain higher than before the COVID-19 pandemic. International trade will slow in 2024 but will also remain higher than before the COVID-19 pandemic.

3. Forecast from Amundi (manages almost $2 trillion worldwide).

– It expects consumption to decline and inflation to remain steady in developed markets.

And we will learn a bitter lesson

– Predicts difficulties in China, which is on the way to weakening amid structural changes in its economic model.

– China's economy will grow by only 3.9% in 2024.

– A recession is expected in the United States in the first half of 2024.

– Emerging markets (EM) are resilient but more fragmented. Asia is the winner in terms of investment flows.

– Inflation continues to decline, but central banks remain vigilant.

– Financing the "green" transition is the primary goal of fiscal policy.

Global economic growth forecast: 2023 – 3%, 2024 – 2,5%, 2025 – 2,7%.

Developed countries (GDP growth): 2023 – 1,6%, 2024 – 0,7%, 2025 – 1,5%.

Developing countries: 2023 – 4%, 2024 – 3,6%, 2025 – 3,6%.

Eurozone: 2023 – 0,6%, 2024 – 05%, 2025 – 1,2%.

USA: 2023 – 2,4%, 2024 – 0,6%, 2025 – 1,6%.

China: 2023 – 5,2%, 2024 – 3,9%, 2025 – 3,4%.

India: 2023 – 6,5%, 2024 – 6%, 2025 – 5,2%

Global inflation: 2023 – 5,4%, 2024 – 4,5%, 2025 – 3,4%.

Developed countries: 2023 – 4,8, 2024 – 2,6, 2025 – 2,1.

Developing countries: 2023 – 5.8, 2024 – 5.8, 2025 – 4.2.

Eurozone: 2023 – 5,7, 2024 – 2,6, 2025 – 2,2.

USA: 2023 – 4,2%, 2024 – 2,6%, 2025 – 2,1%.

China: 2023 – 0,4%, 2024 – 1,1%, 2025 – 1,6%.

4. The OECD and the Asian Development Bank have also lowered their forecasts for global growth in 2024.

Global economic growth in 2024 will be about 2.5%. This is lower than the IMF forecast.

The main risks to the global economy:

– The war in Ukraine could lead to further increases in energy and food prices. This could lead to a decline in real household incomes and a slowdown in consumer demand.

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Rising inflation may lead to a decline in the population's purchasing power and a slowdown in business activity.

– A tightening of monetary policy could lead to a slowdown in investment and consumption growth.

5. Map of the 10 critical risks in 2024 by BlackRock:

1. Strategic rivalry between the United States and China (high risk). BR does not see military action in the near future but believes that the risk is growing.

A significant milestone will be the presidential election in Taiwan in January 2024.

2. Major cyberattacks (high risk);

– This year, hackers penetrated the accounts of several US officials, exposing the vulnerability of government infrastructure.

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– Cyber activity will increase in conflict zones and around the upcoming elections, which could lead to their disruption.

– Technological advances, especially in artificial intelligence, may increase the risk of malicious attacks.

3. Major terrorist attacks (high risk).

4. Global technological division (high risk). The technological divide between the United States and China is accelerating significantly in terms of its scope and scale.

5. Russia–NATO conflict (high risk).

– The war in Ukraine becomes protracted, increasing the risk of escalation with NATO. Western financial, energy, and technology sanctions against Russia continue to grow.

– A diplomatic solution is not expected in the near future.

– Ukraine's counteroffensive is progressing slowly, and a dramatic breakthrough seems unlikely.

– The protracted war of attrition is expected to last until next year.

– Western support has been crucial to Ukraine's success, but the issue will become increasingly politicized in the United States.

– The most likely long–term outcome is a political, economic, and military confrontation between the West and Russia.

–    The Western allies announced a long–term commitment to Ukraine's security at the NATO summit this summer, essentially bringing Ukraine under the Western security umbrella.

6. Tensions in the Persian Gulf (high risk).

– The risk of regional escalation is high, especially if other groups, such as Hezbollah, attack Israel or American assets in the region.

– The United States has deployed significant military forces in the region to support Israel and deter other actors from entering the war.

– If there is direct evidence of Iranian involvement in the attack, we could see Israeli retaliation that would affect energy flows and markets.

7. Political crisis in emerging markets (medium risk):

– Rising oil and food prices and higher interest rates in the US are risks for emerging markets (including Ukraine).

– We are concerned about the lack of global cooperation on debt relief.

8. North Korean conflict (medium risk). North Korea continues to build up its nuclear weapons and takes provocative actions, such as missile launches.

9. Climate policy deadlock (medium risk):

– Developed countries are unable to increase public investment or take measures to achieve zero emissions targets.

– The war in Ukraine has brought energy security to the forefront. The crisis will accelerate the transition to a low–carbon world.

10. European fragmentation (medium risk):

– The energy crisis and inflationary pressures are leading to a resurgence of populism and economic instability.

–    The war in Ukraine has generated a strong impetus for European unity. Progress has been made in reforming the EU budget rules, and a possible agreement will be reached by the end of the year. The expected centrist and pro–European coalition government in Poland is a positive factor for European unity

6. The international consulting company A3M specializes in risk management and has published a world map with countries categorized by risk level. The risk classification consists of assessments of the following categories:

– Entry and exit from the country, transportation.

– Strikes, infrastructure risks.

– Healthcare and health risks.

– Natural hazards and environment, security.

– Economic security (including corruption).

– Special risks (cultural peculiarities)

Ukraine is highlighted in the group of the riskiest countries.

7. Geopolitical risks from the TENEO agency. The events of 2023 suggest that the global system has entered an intense period of structural transformation that will change geopolitics and fundamentally alter the international business environment:

– Russia's war in Ukraine continues.

– Frozen conflicts in places like Israel/Gaza and Armenia/Azerbaijan.

– Coups d'état are once again commonplace in Africa.

–    Tensions increased between China/Philippines, Serbia/Kosovo, and other countries.

Africa:

– In 2024, South Africa will face a major political shock, comparable to the 2016 municipal elections, but at the national level. For the first time, the African National Congress (ANC) faces a real risk of losing its parliamentary majority in the 2024 elections

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– In Africa, the risk of national defaults is generally growing, with many governments no longer able to cope with debt service.

– The risk of coups d'état in sub–Saharan Africa will remain elevated in 2024.

– Key countries to watch include those with long-standing family dynasties or leaders, especially Togo, Cameroon, Chad, Congo–Brazzaville, Equatorial Guinea, Eritrea, and Uganda.

–    Countries such as Ethiopia, where the Amhara and Oromo militias are challenging the federal government, are also vulnerable.

– Coups or failed political transitions can result not only in the decline of democracy, but also in the escalation of civil wars and humanitarian crises, as in Sudan and, increasingly, in Mali.

Global attention:

– The conflict between Israel and Hamas is the most significant risk to oil markets in the run-up to 2024.

–    As the United States enters an election year, concerns about high oil prices have led to a more lenient application of Iranian sanctions, with large volumes of Iranian oil – about 500 thousand barrels per day more – entering the market in 2023.

Asia:

– China's rising global influence remains in question, with the overall economic recovery from the zero Covid policy being disappointing.

– There is a growing view that "Peak China" has already passed.

– Xi seeks to refocus China's economy on industries such as semiconductor manufacturing, clean energy, electric vehicles, and biotechnology. However, these are still too small to fill the hole left by traditional growth drivers such as housing and infrastructure.

– The housing market will be a crucial test in 2024.

– In Taiwan, the presidential election in January will set the tone for the next four years of relations between the two sides of the Strait.

– In April/May, India will hold the world's largest democratic elections.

–    In Southeast Asia, Indonesia may see its most important election in decades in February, with Defense Minister Prabowo Subianto one of the first contenders to succeed President Joko Widodo.

Europe:

– There is little reason to be optimistic about the development of the military conflict in Ukraine.

– The West is unable to provide the large–scale military assistance that Ukraine needs.

– Russia, on the other hand, is increasing its production capacity.

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– Moscow seeks to regain the initiative by ramping up its offensive on the vast eastern front line. The Kremlin hopes to secure military victories ahead of Russia's presidential election in March.

– Any noticeable reduction in foreign aid to Ukraine could open the door to new Russian gains, strengthening the Kremlin's resolve to pursue maximalist goals by military or diplomatic means–in Ukraine and possibly beyond.

– In the EU elections, far-right parties are expected to do better than in 2019.

–    A trend likely to continue in the next Commission is the desire for measures to rebalance economic relations with China.

Artificial intelligence.

– Research shows that the artificial intelligence market will grow by at least 30% annually over the next decade, with AI tools being used in education, healthcare, business operations, and beyond.

– Investment models predict that by 2025, more than $200 billion will be invested in artificial intelligence worldwide.

– In the EU, the Artificial Intelligence Law will come into force by June 2024, after which the European Commission and member states have 18 months to develop the systems necessary to enforce the policy effectively.

UNITED STATES:

– With the White House increasingly focused on next year's election campaign, US foreign policy in 2024 will be aimed at stabilizing a world that seems to be spiraling out of control.

– Three issues will have enormous implications for US security, the global economy, and US domestic politics.

– Strategic competition between the United States and China will remain the most significant source of geopolitical risk. In 2024, President Joe Biden intends to pursue a predictable and pragmatic approach to China, where a slowing economy may encourage Xi to reduce tensions. However, powerful structural obstacles – and election-year politics – will likely prevent any sustained détente. Both countries will remain focused on establishing their own leadership in strategic technologies (e.g., artificial intelligence) and will continue trying to block each other's competitive advantages.

– The clash between Israel and Hamas is likely to last for several weeks or even months and will continue to alarm the entire Middle East for even longer.

First and foremost, Washington will seek to contain the Gaza Strip crisis, preventing any regional spillovers that could threaten more global economic consequences, such as rising energy prices. Biden will continue to balance support for Israel, US relations with key Arab states, and the diverse views of his political base.

Ukraine:

– There is no solution to Russia's invasion of Ukraine in sight.

– As the fighting escalates into a costly war of attrition, the White House will have to maintain the shaky international coalition supporting Kyiv and rebuild domestic support for US assistance to Ukraine.

With crucial voices in the Republican Party increasingly skeptical of such commitments abroad, Biden's quest for the United States to rally global democracies against authoritarianism will face obstacles as we approach November 2024.

This is about 1/3 of the forecasts I have studied in recent days. The rest are very close to the above estimates. Therefore, we need to prepare for new challenges and prepare strict anti-crisis effective plans:

1. Self–sufficiency in production facilities for manufacturing ammunition and military equipment.

2. We need an effective wartime economy that meets the challenges. Every enterprise and every Ukrainian should work for defense and victory.

3. If we do not receive the necessary amount of Western aid, we can use the bond issue (the NBU finances the Ministry of Finance) to secure the defense procurement.

– Let me remind you that during World War II, the state demands accounted for up to 70% of GDP.

4. We need a program to ensure Ukraine's self–sufficiency in all necessary resources: energy, technical, food, and critical materials.

5. We need professional state management to organize all these processes.

These are only some necessary steps, but we must start somewhere. There is no more time.

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Read the original article on The New Voice of Ukraine