The global economy has been outperforming expectations for all of 2023, and a combination of disinflation, a recovery in manufacturing, household income growth and an end to rate hikes by the developed market central banks, leads some forecasters to predict that 2024 will be another strong economic year.

According to Goldman Sachs’ Macro Outlook 2024, global gross domestic product will wrap up the year beating the consensus forecasts of last year by 1% globally, thanks to a drop in core inflation from 6% in 2022 to 3%. The U.S. GDP will best forecasts by 2%, the firm said.

And although inflation is still higher than it’s been over the last 10 years, Goldman Sachs expects it to continue to drop, hitting the 2% to 2.5% range at the end of 2024.

“More broadly, we expect another year of growth outperformance across most of the economies we cover. We forecast 2.6% global growth in 2024 on an annual average basis,” Goldman Sachs said. “Most notably, our forecasts call for U.S. growth to again outpace its developed market peers, with country-level forecasts implying 1.1% outperformance (vs. consensus) in the U.S., 0.5% in Japan, 0.5% in Canada, 0.3% in China, 0.3% in Australia, and 0.2& in the Euro area.”

There are four primary reasons for this optimism, the firm said. First, Goldman Sachs sees real disposable income growth in the face of disinflation and strong labor markets. In the U.S., for example, the firm expects real income growth to slow to 2.75% in 2024 from 4% this year, but that should still be enough to support consumer consumption and GDP growth of at least 2%.

Second, now that monetary and fiscal policies are most likely finished with tightening, the drag on GDP is ending. Typically, the drag on GDP during a tightening cycle lags about two quarters, and therefore a smaller drag is expected in 2024.

Third, manufacturing should recover after a lackluster pace in 2023 as inventories-to-GDP ratios stabilize.

And fourth, the central banks believe they don’t need a recession to tame inflation, and therefore will try to avoid one, the firm said.

“Central banks will lose little time before pivoting to cuts if the growth outlook deteriorated meaningfully,” Goldman Sachs said.

Looking ahead, the firm continued, 2024 should offer better real returns to investors now that the global economy is out of the post-Great Financial Crisis environment of negative real yields.

“The transition has been bumpy, but the upside is that the investing environment now looks more normal than it has at any point since the pre-GFC era, and real expected returns now look firmly positive,” the firm said. “The yield outlook is one investors could only dream of for most of the period since 2008.”

But a period of “higher for longer” yields may reveal weaknesses in the U.S., such as lack of access to finance for smaller companies, and subdued mortgage, housing and commercial real estate activity.

“We do not expect these to threaten the overall economic outlook,” the report said. “The bottom line is that although we expect a broad range of developing and emerging market economies to avoid recession in the coming year, the case for U.S. growth outperformance looks stronger.”

10. Canada

In 2023, Canada ranked 10th in GDP—with $2.118 trillion—the result of a strong banking sector, active mining, manufacturing and service sectors, and robust global trade. The nation is signatory to more than a dozen free trade agreements with 51 other countries.

Here, services account for 70.2% of the GDP, industrials for 28.2% and agriculture for 1.6%.

Roughly 75% of employment is found in the service sector. However, the forestry and petroleum industries continue to be top employers. With vast deposits of both natural gas and oil, Canada is a developed nation that is also a net exporter of energy, which is unusual.

Other areas that are key to this vibrant economy are fishing, manufacturing of automobiles and aeronautics, mineral export and agricultural products.