The Mastercard Economics Institute has released its forecast for the global economy next year. Titled ‘Economic Outlook 2024’, the annual report identifies the themes that will define the world’s economic landscape.
According to Mastercard, the global economy will feel more “normal” in the coming year than the prior three. That said, it will still be an economy seeking equilibrium, with a careful balancing of high interest rates, salaries and prices compared to pre-pandemic levels. The backdrop, however, remains one of consumer empowerment with moderating inflation and steady real economic growth, but with varied regional dynamics.
Mastercard on MENA
In the MENA region, the report sees consumers and businesses facing crucial decisions about spending and investing. “Price differentials and interest rates will have burrowed into budgets, informing the resources available with less wiggle room,” the report added.
In 2024, the institute expects real consumer spending year over year to increase by 5 percent in the United Arab Emirates (UAE). It will be 4.3 percent and 1.2 percent in Saudi Arabia and Egypt, respectively.
Expansionary fiscal policy is set to continue to support growth in the Gulf Cooperation Council (GCC) countries. Furthermore, a significant investment drive for more development through giga projects is underway in Saudi Arabia. Meanwhile, UAE will seek to maintain its traditional position as the regional trade and investment hub. Egypt, on the other hand, is tightening policy to reduce macroeconomic imbalances. Tourism will likely remain a bright spot for many of the region’s economies.
“While economies in the MENA region are impacted by several factors including geopolitical conflict, cost of living instability and currency fluctuations, strong government visions are providing a supportive foundation for economic stability. This is encouraging empowered and resilient consumers to confidently take charge of their needs and wants within the constraints of available resources,” said David Mann, chief economist, Asia Pacific and EEMEA, Mastercard. “A strong labor market underpins consumer purchasing power and the Mastercard Economics Institute anticipate the easing of monetary policy will help sustain consumer spend in interest-sensitive sectors.”
Read: The global economy in 2024: Déjà vu or breakthrough?
Key findings
The report forecasts that spending will be prioritized based on ‘needs’ and ‘wants’. Even with inflation taking a larger chunk of spending on essentials, consumers will prioritize discretionary spending. Some of the popular choices will be on travel, events and live concerts. Movies are also high on the list, as evidenced by the success of Taylor Swift’s The Eras Tour and “Barbenheimer”.
The MENA region is seeing a particular boost from tourism. Egypt and Tunisia were in the top five fastest-growing destinations for Europeans in 2023 compared to 2022. Meanwhile, the GCC’s strong push to grow its tourism sector have made the region one of the world’s fastest-growing destinations. In 2023, the GCC is estimated to have registered a 22 percent increase in inbound tourist spending compared to 2019. The figure is 26 percentage points higher than the global average.
Continuing rise of e-commerce
With supply chains finally untangled, consumers can once again wait until the last minute for purchases with few constraints and perhaps add more options to cart to try on at home. Paired with the pandemic-fueled acceleration of businesses going online for the first time, increased returns may point to increased customer loyalty, where shoppers’ growing comfort with e-commerce increases sales and returns — and also repeat visits.
Across 10 economies, the rate of returns for online transactions grew from 2019 to 2023. However, it remained relatively unchanged in store. In the GCC, this was particularly pronounced. The e-commerce rate of return increased by 13.2 percent in the UAE and 12.4 percent in Saudi Arabia.
Inflationary pressures to ease
Central banks are likely at or close to peak rates, according to the Mastercard Economics Institute. Some easing is expected next year as inflation cools while growth remains subdued, prompting a partial normalization of monetary policy.
Globally, the Mastercard Economics Institute expects inflation to moderate to 4.9 percent year over year in 2024. This figure represents a decline from 2023’s 6 percent, but still above the pre-pandemic trend of 2.7 percent. Despite that, the Institute predicts global economic growth in the coming year to feel similar to 2023, and anticipate inflation-adjusted GDP to grow 2.9% year over year in 2024.
The “Economic Outlook 2024” report draws on a multitude of public and proprietary data sets, including aggregated and anonymized Mastercard sales activity, as well as models that are intended to estimate economic activity.
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