World Bank forecasts 2024 global growth to slow for third consecutive year

The World Bank warned on Tuesday (Jan 9) that global growth in 2024 is set to slow for a third year in a row, prolonging poverty and debilitating debt levels in many developing countries.

Hamstrung by the Covid-19 pandemic, then the war in Ukraine and ensuing spikes in inflation and interest rates around the world, the first half of the 2020s now looks like it will be the worst half-decade performance in 30 years, it added.

Global GDP is likely to grow 2.4 per cent this year, the World Bank forecast in its latest Global Economic Prospects report. That compares with 2.6 per cent in 2023, 3.0 per cent in 2022 and 6.2 per cent in 2021 when there was a rebound as the pandemic ended.

That would make growth weaker in the 2020-2024 period than during the years surrounding the 2008-2009 global financial crisis, the late 1990s Asian financial crisis and downturns in the early 2000s, World Bank Deputy chief economist Ayhan Kose told reporters.

Excluding the pandemic contraction of 2020, growth this year is set to be the weakest since the global financial crisis of 2009, the development lender said.

It forecasts 2025 global growth slightly higher at 2.7 per cent, but this was marked down from a June forecast of 3.0 per cent due to anticipated slowdowns among advanced economies.

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The World Bank’s goal of ending extreme poverty by 2030 now looks largely out of reach, with economic activity held back by geopolitical conflicts.

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” World Bank Group chief economist Indermit Gill said in a statement.

“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,” Gill added.

This year’s lacklustre outlook comes after 2023 global growth came in an estimated 0.5 percentage point higher than forecast in June as the US economy outperformed due to strong consumer spending.

The US economy grew 2.5 per cent in 2023, 1.4 percentage points higher than its June estimate, the World Bank said. It forecast growth this year to slow to 1.6 per cent as restrictive monetary policy restrains activity amid diminished savings but said this was twice the June estimate.

The eurozone’s picture is considerably bleaker, with growth this year forecast at 0.7 per cent after high energy prices resulted in just 0.4 per cent growth in 2023. Tighter credit conditions prompted a 0.6 percentage point cut to the region’s 2024 outlook from the bank’s June forecast.

China also is weighing on the global outlook as its growth slows to a forecast 4.5 per cent in 2024. That marks its slowest expansion in over three decades outside of the pandemic-affected years of 2020 and 2022.

The forecast was cut 0.1 percentage point from June, reflecting weaker consumer spending amid continued property sector turmoil, with 2025 growth seen slowing further to 4.3 per cent.

“More generally though, weaker growth in China reflects the economy returning to a path of weakening potential growth due to an ageing and shrinking population, rising indebtedness that constrains investment and in a sense, narrowing opportunities for productivity to catch up,” Kose told reporters.

Emerging market and developing economies as a group are forecast to grow 3.9 per cent this year, down from 4.0 per cent in 2023 and a full percentage point below their average in the 2010s.

That pace is not enough to lift growing populations out of poverty and the World Bank said that by the end of 2024, people in about one out of every four developing countries and 40 per cent of low-income countries will be poorer than they were in 2019, before the pandemic.

The World Bank said one way to boost growth, especially in emerging market and developing countries would be to accelerate the US$2.4 trillion in annual investment needed to transition to clean energy and adapt to climate change.

The bank studied rapid and sustained investment accelerations of at least 4 per cent per year and found that they boost per-capita income growth, manufacturing and services output and improve countries’ fiscal positions. But achieving such accelerations generally requires comprehensive reforms including structural reforms to expand cross border trade and financial flows and improvements in fiscal and monetary policy frameworks, the bank added. REUTERS