ECONOMY
According to the experts, 2024 will be a year of economic recession?
A recession was staved off in 2023 despite some economists predicting one. How is the economy shaping up for 2024?
The US economy has been resilient throughout 2023. Buffeted by interest rates, that climbed to their highest levels in two-decades, tackled by inflation, that is still double the amount targeted by the Federal Reserve, and still under pressure from geopolitical tensions, the US economy has grown by nearly 5% since this time last year.
Compared to other major western economies this is huge; it is the fastest GDP increase since 2021.
There were persistent fears throughout the year that the measures taken to address inflation would wrestle the country into a recession, though this proved not to be the case. With 2024 just around the corner, can this situation be averted once more?
Expert opinion on the country’s economic health for 2024
Despite the positive news for the end of 2023, the jury is still out on whether this can be repeated next year. Indeed, the Federal Reserve Bank of New York says that there’s a more than a 50/50 chance that the economy will fall into a recession by September 2024. There are no expectations that the surprise year-on-year GDP increase of 4.9% will be replicated.
“The staying power of this growth spurt is questionable going forward,” says economist Olu Sonola of Fitch Ratings. “Above trend economic growth cannot sustainably co-exist alongside an increasingly restrictive interest rate environment.”
It is the interest rates which are the real sticking point. Since March 2022, the Federal Reserve has been attempting to see off high inflation by pushing interest rates up to a range of 5.25% to 5.50%. With the cost of borrowing substantially higher than two years ago, and therefore less willingness from companies to take financial risks, persistent high rates are designed to slow an economy down.
The blunt measures have not yet quelled inflation to the Fed’s 2% annual target though these rates are predicted to fall through 2024.
Other economists are hopeful that there will not be a recession in 2024.
“We are not going to see recession, that is not in my outlook,” Atlanta Federal Reserve President Raphael Bostic said. “We are going to see a slowdown, and inflation will get down to 2% [by late 2024].”
So while it is there are conflicting views on whether a recession will be avoided, it is a surety that 2024 will not be a year with a financial boom.