The pandemic, wars as well as the rising cost of living have terribly impacted the global economy and put the brakes on its growth. Organisation for Economic Co-operation and Development (OECD) foresees that global economic growth will persist to be weak in 2024 as well, while the forecasts show that it will be lesser than last year. The International Monetary Fund (IMF) anticipates global growth to slow down to 2.9% in 2024 from that of the previous year. It states that “the global economy is limping along and not sprinting”.  This statement asserts that the tough times are far from being over yet.

Apart from the sluggish global economic growth, the world will have to face sticky inflation too. This economic situation is likely to continue till the year 2025 before getting back to the pre-pandemic levels.

A recent global economic survey establishes that geopolitical instability and inflation are the main factors that hinder the growth of the global economy. The geopolitical tensions have played a major role in the disruption of the economy, causing hindrances in the supply chains, as well as the surge in the prices of essential commodities. As these tensions are anticipated to continue in 2024, the economic repercussions are expected to linger as well. Thus, the macroeconomic condition will persist to be disappointing and uncertain for businesses in 2024.

Inflation is mostly unfavorable for businesses. Because of inflation the cost of raw materials, labor, utilities, and energy surges, and this in turn increases the production cost. And so, to deal with the increased expenses the businesses have to hike the price of their products too. However, inflation can cut down the purchasing power of consumers as their income does not increase proportionately. This eventually affects the sales and revenue of the businesses. Businesses also find it hard to keep up with the competition in an inflationary environment.

Change is a pervasive and perpetual aspect of the business environment. The shifts caused by the new emerging technological advancements, increasing oil and food prices caused by the war, geopolitical issues, climate change, and supply chain crisis dramatically impact the growth of the economy. The possibility of inflation dropping back to pre-pandemic levels cannot be anticipated earlier than 2025.

The other factor that affects the global economy and thereby businesses around the world is Unemployment. Unemployment is a condition where people dynamically hunt for jobs and are unable to find them. Although unemployment fell considerably compared to the pandemic times, the global labor markets show an imbalanced recovery from the pandemic effects. The low-income countries are still struggling to recover.

This situation is detrimental for businesses because when individuals are jobless, they do not have sufficient income and consequently they have negligible purchasing power. Also, a lower employment rate raises wages leading to more business expenses.

Apart from that interest rates are predicted to remain high in the forthcoming year. Higher interest rates also affect businesses adversely, especially the ones that depend on loans or other forms of debt financing.  

Repaying debts becomes immensely difficult for businesses that are dependent on loans to a great extent. It can give rise to several challenges for businesses that are under financial pressure instigated by increased loan burdens connected to servicing debt and keeping businesses operational throughout times of volatility or crisis. It can eventually cause financial destabilization of the business if not managed properly.

There is also a fear of recession in 2024, then again economic experts have divided opinions about the possibility of recession this year. A recession is a phase where there is a substantial decline in whole economic activity in a certain country or region.

Recession causes job loss and so the spending power of the consumers drops. It poses a threat to businesses as it leads to a decline in sales and profits. It not only affects the revenue by low sales but also causes cash flow problems as a result of delayed payment on invoices from the clients.

Economic slowdowns are not great news for businesses. However, as they are inescapable there is no other option than to find ways to deal with them and be prepared for the same.

Economic downturns can be used to the best advantage by identifying the threats and looking for opportunities. To reframe the situation of businesses, it is equally necessary to understand the consumer behavior that changes during these times.

Successful businessmen always make the most of tough situations by turning them into opportunities to rethink their business. The key is to identify and seize opportunities.