As the winter weather begins to recede, and we find ourselves heading into spring, it feels natural to take stock of where we are at in 2024 – the tendencies and trends that have shaped the initial months, and will continue to be top of the agenda for the coming year.
Inflation and interest rates – heading down, but uncertainty remains
Compared to the end of 2023, when investors appeared convinced of rapid interest rate cuts this year, on both sides of the Atlantic, a degree of pessimism has returned. Whilst rate cuts from the Fed appear likely in the United States, the path and timing are laden with uncertainty.
And in Europe, whilst the double figures rates of inflation seen at the end of 2022 are – thankfully – a thing of the past, increased inflation vis a vis the ECB’s 2 per cent target remains.
In the Danish context, where inflation remains above target, interest rate cuts appear unlikely – at least in the first half of the year.
Election fever
To what extent will this economic environment shape the decisions made by voters? 2024 will give us multiple data points to test this hypothesis.
This is because, in 2024, more than half of the world population will head down to the polling booths to take part in what will be the biggest election year in history.
The citizens of Pakistan (245m) and Bangladesh (175m) have already voted – and in the coming months, from India (1.4 billion people) to the United States (342 million people), new governments will be elected across much of the world. And in many other large nations – Brazil (218 million people) and Turkey (86 million people) – local or municipal elections will be held. On top of this, the voters of the 27 European Union member states will elect the MEPs of the next European Parliament.
Whilst some elections are remarkably easy to call – anything other than a Putin “victory” in Russia would be an enormous surprise – there will be serious consequences for the climate, markets, and geopolitics as a result of some of these democratic events: not least the contested US election in November.
AI – going mainstream?
And amidst these political run-offs, the possibilities promised by the advance of AI continue to evolve – Sora, OpenAI’s text-to-video model, has just been presented, to enormous fanfare.
Whilst there are some – indeed including OpenAI CEO Sam Altman – who have voiced concern about the impact of AI on elections, the bigger question remains the economic and societal impact of this technology.
Trends and tendencies interact with and influence one another. Were we still in the benign economic environment pre-covid – with cheap money and buoyant quantitative easing – it would be a safe prediction that mammoth investments in this field would be forthcoming. And to be clear, many firms are making massive investments on this front.
But the financial environment is the big joker here – will firms invest at the scale necessary to get the most out of this technology?
Certainly, my sense is that, amongst SMEs, AI has not yet fully reached the top of their agendas.
Will COP catalyse the step change?
And, of course, the climate continues to be an issue for all of us – alarming reports come at a rapid frequency: 2023 was the warmest year on record, and January 2024 was the warmest January on record.
Like the sunlight breaking through cloudy skies and once snow-covered streets, there are rays of hope on the horizon. COP conferences are increasingly contentious events – where economic interests clash with environmental imperatives.
Few will forget Lars Løkke banging the gavel, or the UK’s COP26 President Alok Sharma fighting back tears in Glasgow. The stakes are high – there is no getting around this.
And to that end, the fact that COP28 for the first time took aim at fossil fuels is positive news – with the final agreed text calling for a “transition away” from coal, oil, and gas.
This is an important symbol for markets, businesses, and governments – the transition is unavoidable and necessary. We need 2024 to be a year where it reaches new heights.
Forfatter spotlight
Majbritt Skov
Spørg mig om: Samfundsøkonomi, økonomisk modellering og ESG i et kommercielt perspektiv Majbritt er partner i Deloitte og leder af Deloitte Economics. Hun har mere end 15 års erfaring med udarbejdelse af mikro- og makroøkonomiske analyser for både den private og offentlige sektor. Majbritt er en efterspurgt økonomisk rådgiver i strategiske beslutningsprocesser om optimering og effektivisering. Majbritt er ekspert i at beregne organisationers impact og kan sætte kroner og ører på bæredygtighed. Ydermere bistår hun virksomheder og investorer med at værdisætte ESG-relaterede risici og muligheder i både et kommercielt og samfundsøkonomisk perspektiv - blandt andet i relation til M&A. Besøg Majbritts blog her Ask me about: Socio-economic impact, economic modelling and ESG Majbritt is a partner in Deloitte and Head of Deloitte Economics. She has more than 15 years of experience with conducting micro and microeconomic analyses for both private and public sector clients. Majbritt is an experienced economic advisor in strategic decision-making processes focusing on optimization and effectivization. She is an expert in the valuation of non-market goods and supports companies and investors in assessing their impact and the value of sustainability and ESG-related risks and opportunities from both a commercial and societal perspective - in relation to M&A amongst others. Visit Majbritt's blog here