The World Bank has projected that global economic growth will decelerate for the third consecutive year, reaching a "sorry record" by the end of 2024. The slowing growth can be attributed to various factors such as tight monetary policy, restrictive financial conditions, and weak global trade and investment.
According to the World Bank's latest Global Economic Prospects report, the global economy is anticipated to expand by 2.4% in 2024, showing a decrease from last year's growth rate of 2.6%. This growth rate is also nearly three-quarters of a percentage point lower than the average pace observed between 2010 and 2019.
Despite this outlook, one positive aspect is that the risk of a global recession has decreased due to the strength of the U.S. economy. However, there are still significant risks to economic growth, including growing geopolitical tensions, the potential escalation of conflicts in the Middle East, persistent inflation, and climate-related disasters.
Moreover, global trade growth for this year is expected to be only half of the average rate seen in the previous decade before the emergence of the Covid-19 pandemic.
Indermit Gill, the chief economist and senior vice president for the World Bank Group based in Washington, D.C., expressed concerns about the global economy's performance by stating that it is on track to achieve the slowest half-decade GDP growth in 30 years.
Developing countries have been particularly affected by these circumstances, as there has been slowing growth in major economies, sluggish global trade, and extremely tight financial conditions. The World Bank projects that developing economies will only grow by 3.9% in 2024, which is more than one percentage point lower than the average of the previous decade.
On the other hand, advanced economies are expected to experience a slowdown in their growth rate from 1.5% last year to 1.2% this year.
Developing Countries Face Elevated Borrowing Costs and Economic Challenges
The World Bank has announced that developing countries, especially those with poor credit ratings, are expected to continue facing high borrowing costs. This is due to the fact that global interest rates are at their highest levels in four decades when adjusted for inflation.
The current weak growth prospects for the near-term have created a worrying situation, leaving many developing countries trapped in a cycle of paralyzing debt. The World Bank estimates that nearly one out of every three people in these countries will have tenuous access to food as a result.
Unfortunately, the World Bank predicts that by the end of 2024, approximately one in four developing nations will still be poorer than they were before the COVID-19 pandemic hit in 2019.
In response to this crisis, the World Bank emphasizes the urgent need for global cooperation. They propose strategies such as debt relief, facilitation of trade integration, combating climate change, and addressing food insecurity. These recommendations were outlined in a recent report released ahead of the World Economic Forum, which will take place from Jan. 15 to 19 in Davos, Switzerland. During this event, international business and political leaders will gather to discuss pressing global issues.
The World Bank's report also highlights the need for a major course correction in order to prevent the 2020s from being remembered as a decade of wasted opportunity. To illustrate the severity of the situation, the report predicts that per capita investment growth in developing economies will average only 3.7% between 2023 and 2024, which is less than half the rate seen in the previous two decades.
Additionally, the World Bank provides regional outlooks for economic growth. Sub-Saharan Africa is expected to experience a growth rate of 3.8% this year, while the Middle East and North Africa are forecasted to grow at a rate of 3.5%. Latin America and the Caribbean are projected to see a growth rate of 2.3%.
Meanwhile, South Asia is expected to experience a slight decline in growth to 5.6% this year, while East Asia and Pacific countries will decelerate to a rate of 4.5%. Finally, Europe and Central Asia are predicted to have a moderate growth rate of 2.4%.
It is evident that developing countries face significant economic challenges ahead. Efforts to address these challenges must be made at both global and regional levels to mitigate the adverse impacts and pave the way for a more prosperous future.
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