The global economy is set to slow for a third successive year in 2024 and is now on course for its weakest half-decade of growth since the early 1990s, the World Bank has warned.
The Washington-based organisation said poor countries were being especially hard hit by a series of setbacks since the arrival of the Covid pandemic and there was a risk that the 2020s would be a “wasted” decade.
The Bank’s half-yearly global economic prospects (GEP) – which concentrates primarily on the performance of developing and low-income countries – found an uneven picture in the recovery period since much of the world was shut down in 2020.
Indermit Gill, the World Bank’s chief economist, said by the end of 2024 all developed economies would have higher income per head than before the pandemic, as against two-thirds of low income countries and less than half of fragile or conflict countries.
“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” Gill said. “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.”
After growing by 6% as the global economy opened up in 2021, the Bank said the rate of expansion had eased back to 3% in 2022 and to an estimated 2.6% in 2023. It has pencilled in growth of 2.3% in 2024, with advanced economies growing by 1.2% and emerging market and developing economies expanding by 3.9%.
Gill said it was vital for poor countries to increase investment and that urgent action to ease their debt burdens would help them do so.
Having been billed as a “transformative decade” that would see major progress towards delivering a zero carbon global economy and achieving the UN’s 2030 development goals, Gill said catch-up work was now required.
“Opportunities still exist to turn the tide”, he said. “This report offers a clear way forward: it spells out the transformation that can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks.”
To tackle the climate change and achieve other key global development goals by 2030, the Bank estimates developing countries will need to deliver a “formidable” increase in investment of around $2.4tn per year.
“Without a comprehensive policy package, prospects for such an increase are not bright. Per capita investment growth in developing economies between 2023 and 2024 is expected to average only 3.7%, just over half the rate of the previous two decades,” it said.
The Bank said one risk to its forecast was an intensification of the war between Russia and Ukraine or the war between Israel and Hamas in Gaza leading to a wider Middle East crisis.
“Recent attacks on commercial vessels transiting the Red Sea have already started to disrupt key shipping routes, eroding slack in supply networks and increasing the likelihood of inflationary bottlenecks. In a setting of escalating conflicts, energy supplies could also be substantially disrupted, leading to a spike in energy prices,” the GEP said.
“This would have significant spillovers to other commodity prices and heighten geopolitical and economic uncertainty, which in turn could dampen investment and lead to a further weakening of growth.”
