The global economy is set to record the slowest half-decade of GDP growth in 30 years in 2024 as mounting geopolitical tensions could create fresh near-term hazards for the economy, said a new report released on Tuesday.
According to the World Bank’s latest Global Economic Prospects, the economy is still in better shape than last year. It projected global growth to slow for the third year in a row — from 2.6 per cent last year to 2.4 per cent in 2024, almost three-quarters of a percentage point below the average of the 2010s.
It projected 3.9 per cent growth for developing economies, more than one percentage point below the average of the previous decade. Low-income countries should grow 5.5 per cent, weaker than previously expected. In advanced economies, growth is set to slow to 1.2 per cent this year from 1.5 per cent in 2023.
By the end of 2024, it said one out of every four people in developing countries and about 40 per cent of low-income countries will still be poorer than they were on the eve of the Covid-19 pandemic. “Near-term growth will remain weak, leaving many developing countries — especially the poorest — stuck in a trap: with paralysing levels of debt and tenuous access to food for nearly one out of every three people. That would obstruct progress on many global priorities,” said Indermit Gill, chief economist and senior vice-president at World Bank Group.
World Bank warned that global trade growth in 2024 is expected to be only half the average in the decade before the pandemic. And borrowing costs for developing economies with poor credit ratings are likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms. “The medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade, and the tightest financial conditions in decades,” it said in its annual report.
Bright prospects
According to the World Bank’s latest Global Economic Prospects, the global economy is in a better place than a year ago as the recession risk has receded due to the strong US economy.
Gill said opportunities still exist to turn the tide.
World Bank said developing countries will need about $2.4 trillion per year to tackle climate change and achieve other key global development goals by 2030.
Ayhan Kose, deputy chief economist at the World Bank, said investment booms have the potential to transform developing economies and help them speed up the energy transition and achieve a wide variety of development objectives.
“To spark such booms, developing economies need to implement comprehensive policy packages to improve fiscal and monetary frameworks, expand cross-border trade and financial flows, improve the investment climate, and strengthen the quality of institutions. That is hard work, but many developing economies have been able to do it before. Doing it again will help mitigate the projected slowdown in potential growth in the rest of this decade,” he added.