 Good evening. Thank you so much for joining us for this briefing on the chief economist outlook and where the global economy is headed, what we can expect in 2024. I'm thrilled to have with me three panelists that will tell us about different sectors, different regions, and also their different outlooks as to what may be happening globally. I have immediately to my left Ludwig Subran, chief economist, Allianz, Germany, and also a young global leader at the World Economic Forum. Welcome Ludwig. Thank you. Next to him we have Karen Harris, who is managing director of the macro trends group at Bain and Company in the United States. Welcome Karen. And finally, we have Mario Maglaes Carvalho Mesquita, who is chief economist of Itaú Unibanco from Brazil. Welcome very much. Thank you. We launched yesterday here at the World Economic Forum, the chief economist outlook, which is all of you plus another 50 of your peers together giving us some views as to what is happening globally and what might be happening in terms of the growth outlook in different regions, what might be happening in terms of inflation. And this year, or this particular edition, we do this every quarter. We did a bit of a deep dive into industrial policy, industrial strategies, and what that might mean for the economy. And we also looked at artificial intelligence. Let me give you some very quick highlights as to as to what we found. Uncertainty is very high. I think those of us that have been here in Davos now for about a day have picked up on that as well. The 56% of the chief economists believe that the global economy will weaken in 2024, but 43% actually foresee that there might be unchanged or stronger conditions. And I think with this group of 50, we've seen that there's very divergent views, but that's roughly where we end up with a slightly more negative outlook. Now, the IMF has forecast a decline in global growth in 2024, so 2.9% for this year versus 3% last year. And over the next five years, an average of 3.1%. So we're looking overall at a pretty weak outlook in the medium term in different regions, different outlooks. So according to this particular outlook, the view is that the strongest growth is likely to be in South Asia and in East Asia and the Pacific with the exception of China, where previously very strong expectations are now down to moderate expectations for about two thirds of the group, but still moderate expectations rather than an expectation of decline. The outlook for Europe has weakened significantly, so that is where our September survey was looking pretty good for Europe. And this time around about 77% of the chief economists expecting very weak growth or weak growth for Europe. USA and Middle East and North Africa also turbulent, again understandably, six out of 10 of the respondents are seeing only about moderate growth in those regions. And finally, some slight improvements in Latin America in Sub-Saharan Africa and in Central Asia. Now I will take a pause here. That's some of what we picked up as to what's happening around the world and we'll get into some of the other issues afterwards. Let me just turn it over to each one of you and share. You must have had one particular view when you answered that survey and there's obviously enormous amounts of research behind those views. So Ludovic, let me maybe turn it over to you. Your expectations for 2024 and why? 2024 is a very complicated year because there are a lot of assumptions behind it. Everybody is actually looking already in 2025 and what happens after the U.S. election. So there is a flavor of muddle through and there is a flavor of successful soft landing both for the U.S. and for Europe. And so that is potentially not too bad for the world while China reignites with growth. So I'm a bit on the camp of actually managing it. Of course risks are tilted to the downside. Normalization comes with a bit more insolvency, a bit more unemployment, but it's okay-ish. But there are strong assumptions, for example, on fiscal policy. When you look at U.S. growth, when you look also at the odds of a soft landing in Europe, it boils down to fiscal policy. And so that's why it's a very difficult outlook because we have one engine of growth left, which is domestic. I mean trade is slightly picking up again, but domestic growth is, you know, what's going to happen in housing. So that boils down to policymaking. The policy mix was monitored by the same fiscal. But a lot is about how much are states ready to consolidate after having done whatever it takes for three years? Are they ready to let go of it and then go into full recession? And we've seen a few countries. My country, Germany, has experienced recession this year. It's one of the few big countries that has had this recession. So it's a bit of a leading indicator of what could happen when you start to really go at the bear engines of growth. So I'm a bit on the optimistic side for now, but I think the job has to be done. And of course, 60% of the world GDP is going to the polls. So vote well is the message. Thank you. We're going to pick up on that. Karen? Edo, I have to laugh when I hear those numbers. I think there are many things that economists do that are incredibly irritating. But one of them that we do is basically 30% means we're convinced enough that if it happens, we can say, well, we said there was a pretty strong possibility last year that that would happen. So when I hear these split numbers, that's pretty much a confession, as Ludovic was saying, is like, wow, there's a wide divergence of potential outcomes. And also economic models are in many respects built like thrumming a rubber band. They collapse back towards last year in their construct. And so when we think about this, working with businesses, the questions we're asking are what are the potential big disruptions for next year and how resilient are we to those? We've heard a lot about, for example, the resilience of the US consumer. And I think in some respects, that's overplayed, consumption has outstripped income. That America is very good at that, but even we can't continue that in perpetuity. Of course, the election is causing a lot of uncertainty. But underlying that, I think that we can actually be a little bit complacent about some of these cyclical risks in the US, given some of the long term, structurally positive factors that are happening, not just the early signs of labor productivity, but where we think that is heading, the tax policy, and of course, the IRA and other investment policies that have basically been a great big fiscal stimulus. That's always helpful. It's part of why we had such a good year. And while we think we're going to have a rather chaotic year in the US, we remain for businesses looking out over three, five years, probably more optimistic than consensus. And on the European side, less complacent about the near term or less concerned, but really worried about some of the structural challenges, demographics and energy costs being among those that I think create a bigger headwind. And so, of course, we all want to know if there's a recession or not. I guess the last thing I'll say is, when we talk about a soft landing, when we think about a recession, it's like an airplane going, sort of going nose first. And a soft landing is the plane landing maybe without the wheels scraping along the runway. So it's not going to be a flawless economy under any circumstances, but you can hear from just those numbers that there's still a lot of uncertainty. And it's really about your conviction around the disruptions and do they matter to your businesses and investments that we were focused on. Thank you. Thank you, Karen. Mario, your outlook globally, but also specifically for your region? For the region. We are also in the soft landing camp. We think that the world economy will grow around 3 percent this year, a little bit less than that, less than the average for the century. Probably building up some slack there, which will allow inflation to come down, but with limits, right? Label markets are tight in many countries still. So it's a soft landing, but we need to see a landing. So we think that on the whole, the market is too optimistic about rate cuts in mature economies. It's not that they won't cut, but probably not as much as its price didn't, because if they do it, we may not even have a landing, right? And then they may need to overdo in the other direction down the road, right? So we are a bit cautious on that. Still, rate cuts, especially by the Fed, are should be helpful for Latin, for Latin central banks. Central banks in the region, they never were, you know, that confident about inflation being transitory because of our history. You know that it always starts transitory, but if you are lenient, it becomes much more persistent. So they understood that. They acted fast and aggressively and early, and they have been cutting already for some time, and they'll continue to ease. And of course, as the Fed also eases, their life will be a bit easier. We have an important election in the region, as well, in Mexico. Most likely, in Mexico, we will elect a female president. The two main candidates are females, so it's almost a given, right? And interestingly enough, this time we think the election north of the border is more likely to impact Mexican assets than the election in Mexico itself, right? So it's a decent environment for EM, not a great one because the world economy is not growing that fast. And for Latin America, as well. One question mark is China. China is very important. It's the main trading partner for South America, right? And it's an economy that is growing less than it used to, and it's increasingly becoming more reliant on stimulus to grow, right? So it's four to five percent this year with stimulus, right? We don't know how much or how fast it would grow without those props. Thank you. I think each of you has alluded to a little bit of the geopolitical outlook. You've all talked about elections, and probably over the last couple of years, most economists have also had to become political scientists and become geopolitical experts as well. Epidemiologists. Also, and let's not forget technology. So we also asked in the outlook about what their views are around geopolitical and geoeconomic fragmentation. About 70% expect that the pace of geoeconomic fragmentation will accelerate this year, and only 13% are expecting an expansion of any kind of economic globalization. So maybe we just do another rapid round with the three of you as to your views on that, and what are some of the big geoeconomic and geopolitical factors that you think will impact the outlook this year? Ludovic, over to you. I'm here. Short. Good news. Trade is coming back in positive territory, so the trade recession is behind us also because China is stimulating the economy. So that's good news on globalization. Second, the number of protectionist measures in the world this year has increased 38% compared to last year. Bad news. Good news, we're all getting used to it. It's a friction, friction trade, friction globalization. Bad news, we start to go at each other's investment flows and not only on trade. If tramps come back, the problem is not going to be on the current account. You already promised to increase tariffs by 10% and triple tariffs on China. He's going to go on the capital account. That's not good because we know that these investment flows can actually really get a country's balance of payment off the cliff. So I'm a bit worried about protectionism going into the financial account, and that is much harder to manage even for international institutions but also for businesses. That was short enough. Thank you. That was great. Karen. There's a domestic issue in that it zaps policy strength. If 99 out of 100 economists agree that inflation is too high, bankers will raise rates and the markets won't fight it. But as we heard, there's a huge divergence in points of view. We've seen data that shows just the standard deviation of expected interest rates means we'll either have a recession or a big one or none at all. Great. Not helpful, right? And so that I think is the decisiveness of policy and the speed of it becomes, there's a headwind. At the international level, fragmentation means higher costs of capital. And we all know that interest rates aren't going to go back to where they were. That's just one factor in that investment flow competition as part of that for sure. I think the opportunity there on the good news, bad news scale, the good news is that we were operating in a world where a lot of industries were dictated by scale at a global level. And when capital flows are more domesticated, are regionalized, and where we can't serve certain industries out of some regions and others, it actually opens up a lot of opportunity for growth and investment that didn't exist before when you couldn't operate at global scale. So it's different. It's not necessarily bad, but it is a change. Yeah. I think that the environment and the de-globalization story has a heterogeneous impact across countries. In the case of Mexico, for instance, it's a country that is already benefiting from near shoring. Mexico was poised to grow a lot after NAFTA was signed, but it was at more or less at the same time that China joined the WTO. So when it started to gain market share in the US, China came and took Mexico's market share. So they are now on the opposite side of that movement. And they are likely to benefit. South America in particular was never that open and that integrated in the global economy. It's particularly my own country, Brazil. And so we never globalized fully. So we're not going to de-globalize. But what concerns me more is beyond trade, as Ludwig said, fragmentation at the capital market level. And this is a concern that I started to hear recently here, including in Davos. And it's an issue that might lead not only to worse distribution of goods, but also worse allocation of capital. Thank you. I'm going to go back and forth with a few different topics. One of the deep dives that we did this year, and one of the topics that is very high on the agenda here in Davos, is of course artificial intelligence and what its impact is going to be. And briefly, at least in this outlook, the sense was that in high income economies, this is going to lead to a lot of increase in the efficiency of output production for developing economies far less so. So 80% came in thinking this is going to be very useful for developed economies. And only about 38% believed that that would be the case for developing economies. And of course, we were asking them to look at just the next three years specifically. And 50%, and again here, very split views, 50% of the chief economists expected generative AI to be commercially disruptive this year. So very different viewpoints there. Just tell us a little bit more, including that North-South angle and how digitized some of those economies currently are. Well, just to throw one point on the North-South divide, we just did a paper on India and the levers for growth for India and also the challenges, climate and so forth. It's fascinating to see how much of a top-down view we have on India has been developing these services, outsourcing, and now they're going to lose all these jobs because AI. And then you talk to Indian entrepreneurs and they tell you, you know what, we're going to leapfrog all these liking universities because the Indians are very smart with training. And they're going to self-train. And AI is going to be the maximum accelerators for human capital gains. Go figure, go tap that, you know, which American University or which European University is even thinking about using AI, they're all thinking about blocking it. So I think we, you know, we haven't seen the beginning of it. I think it's, you know, I started working, I always had a phone, internet and the computer. But I know people in the office when I started 20 something years ago, they were telling me, oh, you didn't know like the punching card and this is going to be our revolution. And I think we're going to lead and we're going to see so many innovations coming from the South. So we shouldn't be so definite about who's going to be on the edge and on the race. Yeah. And AI is impact on growth more broadly. What's your I think it's, it's going to be very strong. I mean, at least if we believe markets, given how much the magnificent seven and the other markets are front loaded of great gains and the productivity gains, we're talking about three, two, three percent of productivity gains just for the US. I think the question is the diffusion, the transmission of this. I'm quite positive on growth. But just like this huge transformation that are exponential, systemic and highly probabilistic in terms of success, they come with winners and losers. And I think the question is going to be whether we are really fully thinking about this. Unlike globalization, maybe 20 years back, thinking about how we make sure we really focus on enhancing the winners while protecting the losers so that people don't have the impression they lose too much, because that would be a huge block blockage and huge counter forces to the true development of AI, especially for white colors. I think it's going to be like the Luddite revolution is going to be like a, you know, fifth industrial revolution. I think we really need to think, I think it's very growth enhancing. My point is the point of rapture for the social compact are so strong that it can only generate growth if we really care for the one left behind as we build these growth enhancing moments and policies. And do you expect it to be a net positive or a net negative? Net positive. For jobs. For jobs, I think it's going to be net positive, because I hope we're not going to have to answer 120 emails a day. AI is going to do it for us. As an economist, it's going to be the ultimate fact checking. I'm going to be presenting today. And then, you know, I'm going to be saying something. And then if you say, oh, I want to know the number for Mongolia, I'm going to like Mongolia and the number will show up. So I will focus on, you know, caring, belonging, empathy, math skills. I'm not going to be focusing on memorizing numbers, which I've been good at. But I think it's going to enhance us. I really believe so. But of course, we shouldn't turn a blind eye. I also have a backup plan to become a massage therapist, if ever. Yeah, it doesn't work, you know, for me as an economist. But I think it's up to all of us to make it count. It should make, look, one statistic, sorry. I just mentioned the statistics last week. The highest number of burnouts, mental health issues are coming from people that are interacting with the public. If we can help soothe these interactions by having the right data available when we have these interactions, we're going to make life of people that have interactions with the public so much easier. So that's how it can be enhancing, not displacing. Karen, your views about AI growth and productivity? Well, I think we're clearly not talking about a 2024 story here, right? This is a foundational technology. If we think about electricity, it took decades. This will have faster uptake. I'm not saying this will be decades, but we're not looking at this necessarily to move the needle across the economy. It takes a very broad footprint to move things macroeconomically. That said, in, I think, to Ludovic's point, and I love the optimism, but I do think there'll be jobs where we'll find that if your defensible moat of your job was the ability to convert human language grammar into tabular data, AI will do that better this morning. It does that better already. So there are places that will be, there will jobs that will be displaced, and I think the question will be where there's opportunity. For example, in just an observation about the U.S., if the policies of near-shoring, right-shoring, reshoring are truly going to reach there and a potential that we must have robotics. It cannot be done with the human bodies we have alone. We need that productivity. So the combination of AI with equipment, with robotic equipment and a co-bot atmosphere in the service sector would free up massive numbers of jobs that are doing things like picking goods in an Amazon warehouse. And I don't think anyone in this audience looks and says, gosh, I really hope my child or grandchild grows up to be fulfilling orders in an Amazon warehouse. So there's a lot of opportunity there to enhance and make jobs better, just stretching the time frame a little bit, which I know Ludovic was doing as well, and thinking about what are the first things that are in danger, again, that human grammar to tabular data, and where the potential is. And that, I think, is an advantage to the U.S. in particular, and developed economies to enhance productivity domestically from it. Thank you, Mario. I think positive on growth, probably negative on employment in the short term, but then positive over time. Certainly the service sector is going to be heavily affected. We already see that in the financial industry where we work, and in my own institution, we have been asked to have initiatives using AI. Imagine the tons of data that we produce every single day. We are using that in a major way to generate indices and to know the clients better, their needs, etc. We use AI to do some of the jobs that are easier, tabulation, etc., capturing data and putting into tables. So we have to find new jobs for the interns, better jobs, better activities for them. In terms of the North-South divide, I think if you ask me a five-year horizon, I think the difference will be quite small. Three-year, okay, but within five years, I think there will be a convergence. In many countries, India is a key example. Many emerging markets are becoming increasingly digital in a somewhat surprising way. That's part of the earlier revolution, the fact that in many countries, in many emerging markets, you have way more cell phones than people. It's the case in Brazil and many others. It's going to catch up pretty fast. I think not necessarily as fast as here, but you don't take that much longer. Thank you. And maybe the final round of discussion around inflation, which I think we all referred to at the start. Yes, inflation is starting to become more moderate, but the prices that people are paying are still a lot higher than they were a year ago or two years ago. Put yourselves in the shoes of some of the key policymakers in this space. I mean, what would you be looking for as a positive? What would you be looking for as a potential source of shocks? From the inflation front, from the inflation. Positive, you should have your business invests. A bit more inflation is good to triage the good, the bad, and the ugly. Capital going into decarbonation, into some of the disruptive technology instead of a zombie fight economy. The bad, if you have a welfare state, you have explosive social expenditures. Because the interest rates are up now, but they're going to be down, but still, your debt servicing costs are really high. And unfortunately, the debt deflation effect is not working as good when you have these explosive fiscal expenditures, just like social protection. So that's for me, for policymakers, that's the two things. We've been used for the past at least 10, if not 15 years, that real and nominal growth were the same. And so I think a lot of politicians and policymakers didn't get the memo that there is volume growth and value growth, and that the price effect could be very disruptive in tough policies that they decide. So competition policies, when you look at the long-term drivers, demographics, the globalization, certainly decarbonation, digital and debt, also public debt, industrial policy, all that is a bit inflationary. They have to be strong on all, from competition to price mechanism, not trying to create these very heterodox policies and then have these huge price spikes afterwards. We see that already as people try to get out of these price controls from energy prices here, but also digital has been very deflationary, now very oligopolistic, a bit more inflationary, demography. So I think policymakers have to think in a way where inflation is not their enemy, but clearly there's going to be more volatile and a bit higher inflation, so they have to keep that in check. If you're a health minister, if you're an education minister, your wage bill is important, all that is, doesn't matter much more than if you were a policymaker for the past 10 years, that's for sure, especially in the advanced economy. But you can take a few cues from Argentina and from, you know, some countries, Turkey, that have had a few more inflation double digits moments because they have had to go through some of these topics and have had to design policies in very high inflationary environment. Thank you, Karen. To throw a few other things in, we're in a massive election year in many economies. Inflation is regressive. It hurts the lowest earners, the hardest. And for central banks, no one shares the blame on inflation. They get it all. That may not be accurate, but certainly it's where that blame gets aimed. Whereas a recession is always the fault of the party that's in power. And so there's an interesting conundrum. If you're talking about putting yourself in the shoes of central bankers, we know, for example, in the U.S., that nobody wants to be Arthur Burns part two. And so the tendency will be to correct the issue that's within your purview. And I think that's just something we should keep in mind as we think about this year's inflation and impacts. Okay. What reassures me is that the damage to inflation expectations has been contained, has been limited. So that part, the central banks managed to do well and to do successfully. What concerns me to some extent is the fact that in a lot of places, central banks are easing policy or are about to ease policy when labor markets are quite tight. And it used to be the case that when they did it, when there was substantially more slack in the labor market. So, okay, it's possible that the economies behave in a different way, in a better way. And, okay, so that they can experiment, right? But with caution, right? I think that the other day, one of my economists said, you know, matter the Phillips curve is really dead. And I said, well, I heard the story before, right? And then it reappeared, right? So I think it's, it's better to sleeping is sleeping as it may be a long hibernation. It's a hibernation still, right? So first name is Lazarus. So it's always scary when people start to believe that, okay, you can do, you know, 300 basis points in the labor market, the labor market is tight, no matter, you can do 300, 300 basis points, it's fine. So that's an issue of a point of caution to me. Thank you. 30 minutes is never enough for these issue briefings. And certainly not when there's such a rich set of insights. I do want to use our final minute for one very quick round from each of you. What's your right spot in the global economy? Where is it that you would look to see some signs of optimism, some potential sources of growth? I know we discussed already a little bit AI and a few other areas. But for this year 2024, any one of you first? I can jump right in. I think economists like India, Mexico, yeah, in several places should perform okay this year. And I think should be a source of support for global growth. I really do. Thank you. We'll have Ludovic go next and Karen gets the final answer. I'm an insurer, so I need to, you know, I sell risk management, you know, I need to people be theory. No, green growth. I think the potential of green growth, and even if it's a bit, you know, ignated by public money, I think there is so much to do. I mean, the AI and sustainability together is, it's wonderful what we can do. So I'm very positive on this. And we've seen already so many innovations come to the market and I'm very positive on what it's going to bring to us. Already in 24, we've already seen some in 2023, but I'm quite optimistic on this. Thank you, Karen. No, at Bain, we work with companies around the world. And the innovation that's happening below the thatch layer has nothing to do with what's happening at the GDP level. Nobody says, well, I had a great idea, but gosh, GDP is down 50 basis points. So I guess I'll, you know, give up. And that, I think is always the excitement and cost for optimism. Thank you very much. Thank you, Mario. Thank you, Karen. Thank you, Ludovic. Thanks to our audience in person and online. Thanks very much.