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The global economy is on track for its worst half-decade of growth in 30 years, the World Bank has warned in its latest projections for 2024, as higher borrowing costs and geopolitical tensions weigh on output.
In forecasts published on Tuesday, the multilateral organisation said gross domestic product in the world economy was set to expand just 2.4 per cent in 2024 — down from 2.6 per cent last year. If the predictions are accurate, it would mark the third year in a row where growth would prove weaker than the previous 12 months.
“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank’s chief economist and senior vice-president.
The lender said global trade growth in 2024 was expected to be only half the average in the decade before the pandemic.
The slowdown in world trade and rise in borrowing costs meant average annual growth for developing countries since 2020 was just 3.9 per cent a year — a full percentage point lower than during the previous decade, it added.
The first years of the decade have been marked by the start of the coronavirus pandemic, the ratcheting up of geopolitical tensions following Russia’s invasion of Ukraine, and the biggest surge in global inflation in a generation. The Israel-Hamas war has raised concerns over a broader conflict in the Middle East.
The warning comes at a time when other multinational organisations are voicing concerns over medium-term prospects for a world economy weighed down by tighter credit conditions and heightened conflict-related risks.
The IMF’s projections for the next five years are at their lowest level since the rise of globalisation in the 1990s. Fund officials have repeatedly warned governments against loosening trade ties, which the fund claims will weaken growth and feed into inflation.
Advanced economies were expected to see growth of just 1.2 per cent, according to the World Bank, down from 1.5 per cent in 2023.
“The main concern in advanced economies is shifting back from inflation to output,” Gill said at a press briefing to mark the report’s release, adding that this was the main takeaway from the US Federal Reserve’s plans to cut rates three times this year from their current 22-year high of 5.25-5.5 per cent.
Meanwhile, the slowdown in growth in China was creating a significant “headwind” for other developing economies, particularly its trading partners in east Asia. Eastern Europe would see slower growth owing to its links with Russia, the bank said.
Low-income countries would perform better this year, with the world’s poorest economies recording average growth of 5.5 per cent, up from 3.5 per cent in 2023.
However, Gill noted that many of these countries and other developing economies remained hamstrung by “more than half a trillion dollars of debt overhang” and shrinking fiscal space.
The multilateral lender urged countries to invest more, saying this could be “transformative” in raising living standards. “When it comes to . . . increasing access to the internet, or coping with problems of inequality, you see significant progress when countries have sustained investment growth,” Gill said.
