In its latest projections, the World Bank warns that global growth is set to be at its lowest level in 30 years as geopolitical tensions and higher borrowing costs weigh on output.
In Forecasts, published by the multilateral organization on Tuesday. The organisation stated that the gross domestic product of the global economy is expected to grow just 2.4% in 2024 – down from 2.6% last year. If the predictions prove to be accurate, this would mark the third consecutive year where the growth will be weaker than last year.
Indermit Gil, senior vice-president and chief economist at the World Bank, said: “Without a significant course correction, 2020 will be remembered as a decade that was wasted.”
According to the lender, the global trade growth for 2024 is expected to be half of the average decade-before the pandemic.
It added that the slowdown in global trade and increase in borrowing costs had resulted in an average annual growth of just 3,9% for developing countries between 2020 — a whole percentage point below what it was during the prior decade.
The start of the new decade has been marked by the coronavirus outbreak, the rise in geopolitical tensions after Russia’s invasion of Ukraine and the largest increase in global inflation for a generation. Israel’s war with Hamas raised fears of a wider 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.
IMF projections are at their lowest since globalisation began in the 1990s. Officials of the Fund have warned governments repeatedly against loosening up trade ties. The fund says that this will lead to a weakening of growth and inflation.
According to the World Bank’s projections, advanced economies will grow by only 1.2 percent, down from 1.5 percent in 2023.
At a press conference to mark the release of the report, Gill stated that the US Federal Reserve plans to reduce rates by three times in this year. The current rate is 5.25-5.5% and has been at this level for 22 years.
The slowdown in China’s growth is creating “headwinds” that are significant for other developing countries, especially its trading partners in East Asia. The bank stated that Eastern Europe’s growth would be slower due to its connections with Russia.
The poorest countries in the world will perform better than ever this year. They are expected to grow by an average of 5.5%, up from 3.5% in 2023.
Gill did note that these and other developing countries were still hampered by “more half a billion dollars in debt overhang”, and a shrinking fiscal room.
Multilateral lender, the multilateral lender, urged countries to increase their investment. This could “transformatively” raise living standards. “When it comes. . . “When countries experience sustained growth in investment, they can make significant progress, whether it’s increasing internet access or dealing with inequality problems,” Gill said.