Economists are optimistic about South Asia, particularly India, as it emerges as a global economic leader in a challenging environment. A survey by the World Economic Forum (WEF) revealed that India’s strong growth is helping South Asia stand out on the world stage, while the US elections are expected to play a key role in shaping global economic policies soon.
India’s Economy Boosts South Asia’s Global Standing
South Asia has been performing exceptionally well, with India at the forefront. According to WEF’s latest Chief Economist Outlook, 70% of leading economists predict strong or very strong growth for South Asia, driven by India’s robust performance. The International Monetary Fund (IMF) recently raised India’s GDP growth forecast for 2024 to 7%, up from an earlier estimate of 6.8%. This highlights India’s significant economic activity and its positive impact on the region.
Inflation Decreases, Commerce Thrives
The global economy is showing signs of recovery, thanks to decreasing inflation and improved global trade. Many economists have expressed cautious optimism, seeing these factors as encouraging for a stable recovery. However, high levels of debt in both advanced and developing nations are a growing concern. Rising debt-servicing costs are limiting governments’ ability to invest in critical sectors like infrastructure, healthcare, and education, creating potential fiscal challenges.
US Elections to Impact Global Economic Policies
One of the most significant factors affecting the global economy in the coming years will be the outcome of the US elections. Around 80% of surveyed economists believe that the election results will have a major impact on global economic policy. US policies often influence trade and financial markets worldwide, and election-related risks could create uncertainty, particularly in 2024 and 2025.
In contrast to the US, Europe is expected to face weaker economic growth, with nearly three-quarters of economists predicting sluggish growth for the remainder of this year. Meanwhile, China continues to struggle, with 40% of economists forecasting weak or very weak growth for 2024 and 2025.
Debt and Fiscal Tightness Pose a Challenge
Debt levels remain a significant threat to the global economy, particularly in developing economies. The survey found that 39% of economists in these regions expect an increase in defaults next year. High debt burdens are putting pressure on governments, limiting their ability to fund essential services and investment in long-term growth.
Additionally, fiscal tightness is preventing many governments from addressing critical issues such as infrastructure development, education, and healthcare. Countries with high debt are at risk of being unprepared for future crises, as they lack the financial space to respond effectively.
Global Economy Stabilizing but Vulnerabilities Remain
Despite these challenges, there is hope for the global economy. WEF Managing Director Saadia Zahidi noted that while the economy is stabilizing, fiscal challenges still pose a significant risk. She emphasized the need for coordinated efforts from policymakers to tackle these issues and ensure long-term growth. Zahidi highlighted the importance of pragmatic solutions that balance fiscal consolidation with growth to avoid hampering the economic recovery.
The survey also revealed that developing economies are more vulnerable to future crises, with 82% of respondents expressing concern about the lack of preparedness. This is compared to 59% in advanced economies, where fiscal challenges are slightly less severe. Rising debt burdens not only threaten short-term macroeconomic stability but also hinder countries’ ability to address long-term challenges like climate change, population shifts, and social cohesion.
