The World Bank's recent report paints a somber picture for the global economy, projecting the slowest half-decade of growth in 30 years. The forecast for 2024 indicates a continuation of this trend, with global growth expected to decelerate to 2.4%, down from 2.6% in 2023. This marks a significant downturn from the pre-pandemic years and reflects the combined impact of the COVID-19 pandemic, geopolitical tensions, and other global challenges.
Ayhan Kose, the World Bank's deputy chief economist, highlighted the severity of these challenges, citing the war in Ukraine and conflict in the Middle East as significant contributors to economic instability. "You have a war in Eastern Europe, the Russian invasion of Ukraine. You have a serious conflict in the Middle East. Escalation of these conflicts could have significant implications for energy prices that could have impacts on inflation as well as on economic growth," Kose explained.
The outlook is particularly bleak for developing economies, which are forecasted to grow by only 3.9% in 2024. This figure falls more than a percentage point below the decade's average, signifying a prolonged period of economic stagnation and potential reversal of progress made in combating poverty. By the end of 2024, approximately one in four developing countries and about 40% of low-income countries will still be grappling with poverty levels exceeding those before the pandemic in 2019.
World Bank Group Chief Economist Indermit Gill expressed concern over these developments, stating, "Without a major course correction, the 2020s will go down as a decade of wasted opportunity." Gill emphasized the need for swift and decisive action to address these issues, urging governments to increase investment and strengthen fiscal policy frameworks to mitigate the projected slowdown.
The World Bank's report also highlights the disparity in economic performances across regions. While North America, Europe and Central Asia, and Asia-Pacific are expected to experience weakened growth, slight improvements are forecasted for Latin America and the Caribbean. The Middle East and Africa are anticipated to witness more marked pickups in growth.
Despite the grim outlook, the World Bank suggests that investment in developing economies could be a key driver for reversing these trends. The report recommends comprehensive policy packages to improve fiscal and monetary frameworks, expand cross-border trade and financial flows, improve investment climates, and strengthen institutional quality. Such measures, if implemented effectively, could ignite investment booms and facilitate the much-needed energy transition.
The report serves as a critical reminder of the challenges facing the global economy and the need for coordinated efforts to address these issues. As world leaders gather for the World Economic Forum, these findings will likely shape discussions and potentially influence policy decisions in the coming years.
