As the global economy steps into the new year, signs of instability cast a shadow over its prospects. According to a recent report from the World Bank, a gloomy outlook looms as it predicts a continued deceleration in international GDP growth, marking the third consecutive year of slowdown and culminating in the weakest performance over a half-decade span in the last 30 years. The World Bank’s Chief Economist and SVP for Development Economics, Indermit Gill, warns that the lack of a substantial course correction could render the 2020s a decade of missed opportunities. Immediate concerns revolve around persistently weak near-term growth, potentially ensnaring many developing nations, particularly the most impoverished, in a cycle of high debt and precarious access to food for nearly one-third of their populations.
The World Bank’s projections paint a subdued picture of global economic growth, anticipating a drop from 2.6% in 2023 to 2.4% in the current year. This figure represents a substantial dip, approximately three-quarters of a percentage point below the average growth observed in the 2010s. The report attributes the deceleration to the lingering effects of stringent monetary policies designed to curb decades-high inflation, restrictive credit conditions, and lackluster global trade and investment. While the robust performance of the U.S. economy currently allays concerns about an imminent global recession, the World Bank underscores the emergence of new economic risks stemming from geopolitical conflicts.
The World Bank’s warning extends beyond the immediate future, signaling a darkening medium-term outlook for numerous developing economies. This dim forecast results from the combination of slowing growth in major economies, sluggish global trade, and the most stringent financial conditions in decades. The agency projects a slowdown in economic growth for advanced economies, dropping from 1.5% in 2023 to 1.2% in the current year. Meanwhile, developing economies are expected to grow at a rate of just 3.9%, over one percentage point below the average of the preceding decade.
Adding a layer of urgency to the situation, the World Bank anticipates that by the end of 2024, a significant portion of the population in developing countries—around one in four—and approximately 40% in low-income countries will still experience poverty levels higher than those prevailing on the eve of the Covid pandemic in 2019. In response to these grim predictions, Indermit Gill asserts that a departure from this bleak trajectory is still possible. Governments, he suggests, can steer economies away from the projected course by acting promptly to boost investment and fortify fiscal policy frameworks. The call is clear: immediate and decisive action is required to avert the looming economic challenges and set a more optimistic course for the years ahead.
