Global growth in 2024 set to slow down for consecutive third year: World Bank

Global Economic Outlook: Presenting a considerably gloomy outlook for the world economy, the World Bank forecast in its latest Global Economic Prospects report, on Tuesday said the Global GDP is likely to grow 2.4 per cent this year. The World Bank has alerted that global growth in 2024 is set to slow down for the third straight year in a row, stretching poverty and debilitating debt levels in several developing countries.

Hit by COVID-19 followed by the Russia-Ukraine war, 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, WB report has added.

The Global GDP is likely to grow 2.4 per cent this year, the World Bank forecast in its latest Global Economic Prospects report said. That compares to 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 informed mediapersons.

Decade of wasted opportunity

Excluding the pandemic contraction of 2020, growth this year is set to be the weakest since the financial crisis that engulfed the world in  2009, the WB 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. 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 paralyzing levels of debt and tenuous access to food for nearly one out of every three people," Gill added.

US spending strong

The lackluster outlook for year 2024 comes after 2023 global growth came in an estimated 0.5 percentage point higher than forecast in June as the U.S. 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 weakens further

As per the WB outlook, 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 aging and shrinking population, rising indebtedness that constrains investment and in a sense, narrowing opportunities for productivity to catch up," Kose told media persons. 

Boosting investment

In its 2024 outlook, the World Bank has stated that one of the ways to boost growth, especially in emerging market and developing countries would be to accelerate the $2.4 trillion in annual investment needed to transition to clean energy and adapt to climate change.

The bank undertook a study of 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.

(With Reuters inputs)