
The World Bank has issued a warning that the global economy is poised to experience its slowest growth since the onset of the pandemic. Projecting a mere 2.4% growth in 2024, the institution attributes this slowdown primarily to elevated interest rates. Ongoing conflicts in Ukraine and the Middle East are expected to further hinder global trade and investment.
Outside the pandemic context, a growth rate of 2.4% would mark the weakest performance since the 2008-2009 financial crisis. Notably, the resilience of the US economy is anticipated to result in a slightly higher growth rate of 2.6% for the previous year.
Indermit Gill, Chief Economist at the World Bank Group, expressed concerns about the persistently weak near-term growth, emphasizing the challenges faced by many developing countries, particularly the poorest ones, trapped in a cycle of high debt and limited access to food.
The report highlights that global growth is currently at historically mediocre levels, with sluggish growth in global trade. Geopolitical risks have intensified, notably due to the fallout from the Israel-Hamas conflict, leading to disruptions in key shipping routes and an increased likelihood of inflationary bottlenecks.
US Secretary of State Anthony Blinken raised political concerns about rising prices, attributing disruptions in global shipping to attacks, which he stated had impacted nearly 20% of global shipping. This has consequences for the cost and time of moving essential goods like food, fuel, medicine, and humanitarian aid.
Despite some central banks gaining control over the cost of living crisis, higher interest rates in major economies may pose challenges for borrowing in poorer countries. The World Bank is particularly worried about the affordability of borrowing for the world’s 75 poorest nations.
The report underscores the uneven recovery from the pandemic, with advanced economies projected to surpass pre-COVID per capita income levels by the end of 2024. In contrast, emerging economies may only reach 75% of pre-COVID income levels, while the poorest countries may lag further at around 66%.
Food costs for the world’s poorest people are a particular concern, especially with last year’s 27% increase in rice prices linked to restrictions on exports by India. However, ample supplies of other crops are expected to result in a 1% decrease in average food prices this year.
China, the world’s second-largest economy, faces challenges with consumer spending reluctance, leading to falling prices. Coupled with significant debts in the property sector, China’s economy is forecasted to grow at just 4.5%, the lowest in decades and below the government’s modest 5% target for 2023. This slowdown has repercussions for other developed economies heavily reliant on China as a major trade partner.
Overall, the World Bank predicts that the five years leading to the end of 2024 will constitute the slowest half-decade of global economic growth in 30 years. Nevertheless, there is optimism that concerted efforts by governments, particularly in encouraging private sector investments, could improve this trend and address challenges such as climate change and the energy transition.