Navigating the economic landscape of 2024

AS another tumultuous year for the global economy heads towards its conclusion, the outlook for 2024 is one of guarded optimism.

This is as businesses in the region seek out growth opportunities amid persistent challenges such as high interest rates, increased operational costs, and severe labour shortages.

How China performs in the new year will be key to the region’s prospects. Selena Ling, chief economist at OCBC, notes that concerns remain over China’s weak consumer sentiment and a stagnant property sector.

“China’s policy stimulus to date has been fairly calibrated. I think there’s a lot of concern that China is going to be weighed down by weak consumer sentiment, and the fact that the property sector is still in the doldrums,” says Ling, who spoke at a panel discussion at CPA Australia’s CFO Connect Symposium in July.

On a brighter note, she believes that Asean’s economic dynamism and focus on innovation make it an attractive market for businesses seeking growth. Many companies are also entering the region as they seek to diversify their supply chains.

“In terms of market size, Asean has a growing middle class and we’ve also seen the rise of e-commerce as well as tech unicorns coming up from different Asian economies. If you innovate and you become more agile and you’re looking for cross-sector, cross-company collaborative opportunities, then there is definitely room to grow,” Ling says.

For Goldbell Financial Services, which offers asset-backed, accounts receivable, and other financial solutions to businesses, the biggest concern in 2024 is the elevated cost of funds.

“The biggest thing that worries me is the cost of funds, because most businesses can’t pass on the full cost of funds to the consumer. It doesn’t work. For my business, I can add a premium to the cost of funds and lend it out. But at some point, my customers will not be able to afford it,” says Alex Chua, chief executive officer, Goldbell Financial Services, who was also part of the panel at CPA Australia’s CFO Connect Symposium.

Managing risk effectively

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With the potential of events like the Taiwan and US presidential elections in 2024 to cause further geopolitical uncertainty, businesses in Singapore and the region must continue to enhance their operational resilience. In particular, experts say mitigating business risks will involve a combination of strategic planning, effective management, and proactive measures.

“Essentially, comprehensive risk strategies, processes and frameworks are needed that include legal counsel, cybersecurity measures, employee training and continuous monitoring of industry trends and regulations,” says Cheung Pui Yuen, Deloitte South-east Asia reputation and risk leader.

“It is important to build a strong risk management team that is a business enabler, the brand guardian and the creator of opportunities for employees to be in tune with risk matters,” he adds.

Meanwhile, sustainability and digital transformation will continue to be key elements in risk strategies going forward. The growing demand for sustainability reporting, driven by regulatory mandates and investor pressure, calls for more robust risk-management measures in the ESG space.

“With this increased emphasis and scrutiny, it is important for sustainability risk management to be robustly integrated into the organisation’s overall risk-management strategies, as sustainability-related issues often come with potential financial implications,” says Cheung, who is also CPA Australia’s Singapore divisional president.

Emerging opportunities

As the global economy heads towards 2024, industry watchers are however also optimistic about the opportunities that will emerge for businesses. Lee Sze Yeng, managing partner, KPMG in Singapore, highlights the potential of generative AI, ESG considerations, as well as digital transformation in driving growth.

“The rise of generative AI offers immense potential for innovation. By integrating this technology within a robust ethical framework, businesses can align their strategies with their core objectives while prioritising the needs of their employees and clients,” she says.

She notes that a significant majority of the CEOs her firm has interacted with are confident about their companies’ growth prospects, spurred on by the potential of generative AI, the increasing relevance of ESG, and the need to continuously enhance workforce skills and capabilities.

However, Lee cautions that success in the dynamic landscape will require a commitment to long-term strategic planning. “It’s important to avoid the pitfalls of short-term, reactive leadership, especially in times of uncertainty. By fostering innovation, enhancing ESG capabilities, and encouraging collaboration, we believe businesses can effectively manage risks and propel growth.”

As they plan for 2024, companies will need to emphasise innovation, strategic risk management, and collaborative ventures as essential components to navigate the economic currents. Despite the prevailing uncertainties, businesses in the region should take advantage of opportunities that emerge to aim for sustainable growth.