World Bank Issues Stark Warning: Global Economic Slowdown Imminent
Developing Economies at Greatest Risk: Calls for Swift Action to Prevent a Lost Decade. In a sobering assessment of the world's economic prospects, the World Bank has raised the alarm, predicting the most challenging half-decade of growth in the last 30 years. The latest edition of the "Global Economic Prospects" report, released on Tuesday, foresees a continued deceleration in global growth for the third consecutive year, with a forecasted rate of 2.4% in 2024, down from 2.6% in 2023.
Despite a marginal uptick to 2.7% in 2025, the anticipated growth trajectory remains significantly below the average witnessed in the previous decade (2010s), prompting concerns about the potential for a decade of missed opportunities.
While the global economy showcased resilience against recessionary risks in 2023, the report highlights emerging threats, particularly from increased geopolitical tensions in Eastern Europe and the Middle East. Ayhan Kose, the World Bank's deputy chief economist and director of the Prospects Group, emphasised the potential impact on energy prices, signalling likely inflation and economic growth challenges.
The report warns that the 2020s may be remembered as a "decade of wasted opportunity without a substantial course correction."
Developing Economies to Bear the Brunt
On a regional scale, North America, Europe, Central Asia, and the Asia-Pacific are expected to witness significant growth weakening in 2024, primarily due to a slower expansion in China. Latin America and the Caribbean are projected for a modest improvement, while the Middle East and Africa anticipate more substantial pickups.
However, the report paints a grim picture for developing economies, projecting them to be the hardest hit in the medium term. Sluggish global trade and tight financial conditions are anticipated to exert considerable pressure on growth. The report warns of near-term weak growth, leaving many developing countries, especially the poorest, ensnared with high debt levels and limited access to food.
Developing economies are expected to grow by just 3.9% in 2024, over one percentage point below the previous decade's average. By the end of the year, approximately one-fourth of people in developing countries and 40% of people in low-income countries are expected to be poorer than before the COVID-19 pandemic in 2019.
The World Bank contends that the world is failing to achieve its goal of making the 2020s a "transformative decade" in addressing extreme poverty, infectious diseases, and climate change. Nevertheless, the report suggests that there is still an opportunity to reverse this trend if governments swiftly increase investment and fortify fiscal policy frameworks.
Call to Action for a Transformative Decade
Investment booms have the potential to transform developing economies and help them speed up the energy transition and achieve a wide variety of development objectives," states Ayhan Kose in the report. To spark such booms, developing economies must implement comprehensive policy packages that improve fiscal and monetary frameworks, expand cross-border trade and financial flows, enhance the investment climate, and strengthen the quality of institutions.
Acknowledging the challenges involved, the report emphasises that many developing economies have successfully undertaken similar efforts in the past. Taking action promptly will not only mitigate the projected slowdown in potential growth for the rest of this decade, Still, it could also pave the way for a more sustainable and inclusive global economic landscape.
The report's release precedes the World Economic Forum, where international business and political leaders will convene next week to address pressing global issues. The urgency of the World Bank's warnings adds weight to the discussions expected to occur at the prestigious gathering.