Note to readers:The Airline Financial Perfomance section is included in the Quarterly Air Transport Chartbook for Q2andQ4 of each year.It is excluded from the Q1 and Q3 reports as the airtline financal performance reviewand forecast arereleased alongside the June and December Glbbal Outlook reports,respectivey.l.The Business Cycle
Global GDP growth stood at 3.1%in 2023 and is likely to remain in this vicinity also this year and next.This
is in line with the long-term average growth rate,and it is a remarkable outperformance compared to the
recession forecasts that dominated the business cycle conversation last year(Chart 1).The United States(US)in particular beat expectations in 2023,growing by 2.5%(annual level over full-year 2022).This wasan acceleration from the 1.9%recorded in 2022 on the same basis.India’s growth rate also exceededexpectations in 2023 and recorded one of the highest growth rates among larger economies.At 6.3%,India surpassed China’s 5%,as has been the case since 2014.India’s share of global GDP (on a purchasingpower parity basis)is estimated at 7.75%in 2024 by the IMF.This is of course much smaller than the 19%share of China or the 15.2%of the US economy on this basis.Nevertheless,if India continues to grow atthis pace,its share in the global economy will increase rapidly,and its contribution to global GDP growthwill become ever more important (Chart 2)?.Local recessions did occur though in 2023,it must be said,affecting Germany and some Eastern European countries,not to mention Argentina or Sudan,amongothers.
Amajor factor that has protected the global economy against recessions is the unusually lowunemployment rates seen around the world (Chart 3).The US stunned the world with a monthly jobcreation in January 2024 of 353,000,more than twice the anticipated number.The unemployment ratestood at 3.7%and has been at or below 4%since December 2021.A possible hint of forthcomingslowdown in labor growth was the small decline in the average workweek and in overtime.The EU and theeuro area unemployment rates are also at historic lows,at 5.9%and 6.4%respectively in December 2023.China reported 5.2%unemployment in 2023 though youth unemployment is much higher,at 14.9%,usinganew methodology.India’s jobless rate was 6.6%in January 2024,down from 8.7%in December 2023.With such tight labor markets,it is almost surprising that inflation has eased as much as it has.
Nevertheless,with respect to central banks mostly targeting 2%inflation rates,major economies are stillsome distance away (Chart 4).In the US,consumer price inflation (CPl)was 3.1%year-on-year (YoY)inJanuary 2024.While 2023 was characterized by recession fears,2024 seems to be imbued with hopes forimminent interest rate cuts.Such hopes are likely to be dashed as long as labor markets remain this tightand inflation this high.
The year has thus globally started off on a rather positive note,and the greatest source of turbulencemight come from the record-breaking number of elections that will be held around the world this year.Amajority of the world population,some 4.2 billion persons,will vote this year,in around 70 countries.Withpolarization running high,election results can give rise to starkly different policies.Much will hinge on theUS elections in November 2024,but other important elections include India’s between April and May,andthe Europeans voting for their European Union representatives in June.For now,the global economic
policy uncertainty index is certainly belowits Covid-19-related peak but at 254 it is also well above its
more normal level as can be seen in Chart 5.
Interest rate cut expectations will likely weigh on the US dollar’s value against other currencies,unless
elections and other sources of geopolitical stress reignite its safe-haven status.If such risks are
contained,2024 could be a year of relative US dollar stability after its strong run since 2021,which would
arguably be a boon for the global economy and for all settling bills and debts in this currency (Chart 6).
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