The World Bank warns of a global economic slowdown and anticipates weakest growth since the crisis
The World Bank has issued a warning that the global economy is poised for its slowest growth since the pandemic, with a forecast of a mere 2.4% growth in 2024. This would mark the weakest growth outside of the pandemic since the 2008–09 financial crisis. The World Bank attributes this sluggish growth to higher interest rates, while global trade and investment remain stifled by conflicts in Ukraine and the Middle East. Last year’s resilience of the US economy is expected to contribute to 2.6% growth, offering a slight boost.
Indermit Gill, Chief Economist at the World Bank Group, expressed concerns about near-term growth, emphasising that many developing countries, particularly the poorest, face challenges like paralysing levels of debt and limited access to food for a significant portion of the population.
The World Bank’s biannual outlook identified the Israel-Hamas conflict’s fallout as a factor that has significantly heightened geopolitical risks. The disruption to crucial shipping routes due to attacks on vessels in the Red Sea has raised concerns about potential inflationary bottlenecks.
While central banks globally have been addressing the cost-of-living crisis, increasing interest rates in major economies could make borrowing more expensive for poorer countries. The World Bank specifically highlights affordability concerns for the 75 poorest nations.
Notably, the report underscores the disparity in recovery between richer and poorer nations. By the end of 2024, all advanced economies are projected to have a per capita income higher than pre-COVID levels. However, emerging economies may only reach 75%, and the average income in the poorest countries might be as low as 66%.
China, the world’s second-largest economy, faces challenges such as reduced consumer spending and a troubled property sector, contributing to a forecasted growth of just 4.5%, the lowest in decades. This slowdown in China presents a headwind to other developed economies, particularly those heavily dependent on Chinese trade.
The World Bank’s overall forecast suggests that the five years leading up to the end of 2024 will witness the slowest half-decade of global economic growth in 30 years. The report emphasises the need for governments to stimulate investments, especially from the private sector, to address challenges like climate change and the energy transition.