Facing Short-Term Headwinds, Which Cities Are Primed for 2024 Growth?
The good news-bad news economic realities of 2023 are spilling into the new year. Although there was no global recession, last year’s growth was underwhelming at best. Considering current circumstances and anticipated trends, analysts now expect a further modest softening of economic conditions in 2024.
Within this general slowdown, there will be wide disparities in the performance of the world’s major cities this year. And some cities are forecast to grow at relatively healthy rates, faster than they did in 2023, despite the lack of momentum in the global economy.
Which cities are better positioned to navigate this challenging economic period, and which will grow fastest? Oxford Economics explores these questions in several research reports.
Expect slow growth globally in 2024, but there will be hotspots
Compared with the 3.0% annual growth achieved during the five years before the pandemic, last year’s estimated GDP expansion of only 2.7% was disappointing. And a moderation in growth is likely this year.
Oxford Economics forecasts an aggregate GDP growth rate of around 2.3% in 2024 for the world’s 1,000 major cities. Economic growth in many European cities will be hampered by the lagging impact of tighter monetary policies, the recent cost-of-living squeeze, uncertainty around house prices, and consequent slowdowns in consumer spending. Most North American cities will also see GDP growth slow in 2024, with some battling recession. And slower growth in China will have repercussions for cities across the wider Asia-Pacific region.
But whilst 2024 will be a challenging year for many advanced city economies, some will prosper. So too will many emerging market cities, which should see a more positive growth outturn in 2024 than 2023, with those in Africa and the Middle east performing particularly well.
North America is a region of contrasts
The outlook for individual cities differs of course, reflecting their unique characteristics, opportunities, and challenges. Beyond national macroeconomic factors, the mix of industries, level of workforce skills, demographic profile, and quality of infrastructure in each city all play a part. As a result, we expect to see notable growth disparities, including within continents and countries.
Take North America, for example. In the US, cities with an information technology focus – such as San Jose, Seattle, and Los Angeles – are forecast to see growth rates of between 2% and 4% in 2024. So too are some leisure hubs, such as Orlando and Las Vegas. By contrast, metros with a high reliance on manufacturing – including Detroit and Indianapolis – will likely see growth only a little above 1% this year. Meanwhile in Canada, the outlook for many metros in 2024 is weaker still, as the economy navigates its way out of recession. Indeed, Canadian metros are likely to see virtually no growth at all in 2024, with Toronto facing a GDP decline as its large finance and real estate sectors are impacted by high interest rates and falling property prices.
China’s economic challenges impact the wider APAC region
China and its major cities are also set for a challenging 2024, as the boosts from the post-COVID reopening fade and the real estate downturn impacts activity. Nevertheless, here too there will be a wide disparity in growth rates, as areas with strength in advanced manufacturing and high-tech services are likely to deliver better performance than other cities. With a high concentration of information and communications businesses, Hangzhou, Changsha, and Shenzhen are among those cities forecast to return above-average GDP growth .
Slower growth in China has implications for the prospects of many other cities in the Asia-Pacific region, adding to other headwinds from a generally weak external environment and tight monetary policy. Whilst that means most cities in the region will see slower growth this year compared with 2023, there will still be some standout performers. Indian cities provide the best example, with the likes of Hyderabad and Bengaluru set to achieve GDP growth close to 9%, underpinned by their strength in digital and professional services. Ho Chi Minh (private services and manufacturing) and Jakarta (digital services, finance, and business administration) are also places to watch out for this year.
A sluggish European outlook masks an east/west split
European cities, in general, are set for modest economic growth in 2024, albeit at rates generally above their respective national averages. Cities in central and eastern Europe, such as Bucharest and Warsaw, are expected to post the strongest economic performance amongst major cities as they recover from a particularly challenging 2023. Amsterdam is likely to be the fastest-growing western European city, due to its strength in business services; but at around 2% GDP growth, this would represent just half that expected in Bucharest .
To better understand patterns for city growth in 2024 and beyond, turn to economics-driven insights from Oxford Economics. We unlock the power of economics to help companies in multiple industry sectors make intelligent, responsible decisions – for today and the future.
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