Davos leaders see a new normal in 2024

Davos leaders see a new normal in 2024

Davos leaders see a new normal in 2024

President of the European Central Bank (ECB) Christine Lagarde attends a session on the closing day of the World Economic Forum (WEF) annual meeting in Davos, on January 19, 2024. 

Fabrice Coffrini | Afp | Getty Images

European Central Bank President Christine Lagarde said she does not expect a return to economic “normality” in 2024, despite seeing a balancing of certain data points throughout the last 12 months.

Speaking on a Bloomberg panel at the World Economic Forum in Davos, Switzerland, Lagarde described the post-pandemic period as “strange, extraordinary and difficult to analyze” and identified three trends that began to normalize last year: consumption, trade and inflation.

The pandemic saw spending fall and people’s savings grow, while global trade was also disrupted. In October 2022, euro zone inflation hit 10.6% but dropped off in 2023, coming in at 2.9% in December.

“In ’23 we have seen the beginning of normalization,” she said on Friday. “When you look at consumption for instance, around the world … consumption is still a driving force for growth, but the tailwind that we had the benefits of, are gradually fading,” Lagarde said. Consumption softened, she said, as the jobs market became a little less tight and consumers’ savings reduced.

Trade, meanwhile, was disrupted by consumers’ preference for buying services over goods in 2021 and 2022, Lagarde said. “But it is beginning now to really pick up and in October, we had global trade numbers that for the first time in many months was up.”

The World Trade Organization (WTO) expects trade to increase by 3.3% in 2024, per a forecast released in October.

Lagarde also noted the broad fall in inflation in 2023. “Around the world, inflation is coming down, and we have seen it in November [in] both headline inflation and core inflation,” she said.

“So that’s what I call the normalization that we have observed in ’23,” Lagarde said on the panel, adding somewhat cryptically: “And maybe you’ll give me the floor another time to talk about it how it is not normality that we are heading to.”

In December, the ECB opted to hold rates unchanged for the second time in a row, shifting its inflation outlook from “expected to remain too high for too long” to expectations that it will “decline gradually over the course of next year.”

Speaking on the same panel, WTO Director General Ngozi Okonjo-Iweala agreed that the economy is “maybe moving towards normalization” but she described it as “not normal, because trade growth is still trending below GDP growth.”

Okonjo-Iweala noted uncertainties that make forecasting “difficult,” including geopolitical conflicts, disruption in the Red Sea and elections around the world.

A ‘new normal’

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