Global economy’s weakest half-decade performance in 30 years likely by end of 2024, warns World Bank

The global economy may witness a poor performance by the end of 2024 — the slowest half-decade of GDP growth in 30 years — and a major course correction is the need of the hour, according to the World Bank. 

Mounting geopolitical tensions could pose new near-term risks to the global economy and the world may experience the slowest half-decade of gross domestic product growth in three decades, according to the latest Global Economic Prospects report released January 9, 2024.

A previous report by the multilateral development bank in June 2023 warned that the global economy was in a precarious position and was on track for a significant growth slowdown as sharp interest-rate increases hit activity and exacerbated vulnerabilities in lower-income countries. It was attributed to several factors, including overlapping negative shocks from the COVID-19 pandemic, Russia’s invasion of Ukraine and a sharp tightening of monetary policy to contain high inflation. 

The global economy is in a better place than it was a year ago and the risk of a global recession has receded, largely because of the strength of the United States’ economy, stated the World Bank. However, the medium-term outlook has deteriorated for many developing economies. Most major economies report slowing growth, sluggish global trade and the tightest financial conditions in decades, the report said.

Global trade growth in 2024 is expected to be half the average in the decade preceding the pandemic. Meanwhile, borrowing costs for developing economies, particularly those with low credit ratings, are expected to remain high, with global interest rates stuck at four-decade highs in inflation-adjusted terms. 

Global growth is expected to slow for the third consecutive year, from 2.6 per cent last year to 2.4 per cent in 2024, nearly three-quarters of a percentage point lower than the average of the 2010s. Developing economies are expected to grow at a rate of 3.9 per cent, more than a percentage point lower than the previous decade’s average. 

Following a disappointing performance last year, low-income countries are expected to grow by 5.5 per cent, which is lower than previously expected. By the end of 2024, people in about one out of every four developing countries and about 40 per cent of low-income countries will still be poorer than they were on the eve of the COVID pandemic in 2019. In advanced economies, meanwhile, growth is set to slow to 1.2 per cent this year from 1.5 per cent in 2023.  

Indermit Gill, the World Bank Group’s chief economist and senior vice president 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. Opportunities still exist to turn the tide.

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, Gill added.

The report advocated for a ‘formidable’ increase in investment by developing countries — approximately $2.4 trillion per year — to address climate change and achieve other key global development goals by 2030. Otherwise, per capita investment growth in developing economies is expected to average 3.7 per cent between 2023 and 2024, or slightly more than half the rate of the previous two decades.