The global economy is facing the prospect of its worst half-decade of growth in 30 years, according to the World Bank’s “Global Economic Prospects” report. The forecast indicates a third consecutive year of slowing growth in 2024, with a dip to 2.4% from 2.6% in 2023. Although a marginal increase to 2.7% is expected in 2025, it remains nearly three-quarters of a percentage point below the average rate of the 2010s. The report warns of geopolitical tensions presenting near-term challenges, with many economies set to grow more slowly in 2024 and 2025 than in the previous decade.
Amid increased geopolitical risks, the World Bank cited the Russian invasion of Ukraine and conflicts in the Middle East as factors that could impact energy prices, leading to implications for inflation and economic growth. Ayhan Kose, the World Bank’s deputy chief economist and director of the Prospects Group, emphasized the potential for conflicts to disrupt economic stability globally. He mentioned that without a “major course correction,” the 2020s might be remembered as “a decade of wasted opportunity.”
Regionally, North America, Europe, Central Asia, and the Asia Pacific are expected to experience the most significant weakening of growth in 2024, primarily due to China’s slower growth. Latin America and the Caribbean are projected to see a slight improvement, while the Middle East and Africa anticipate more marked pickups. However, developing economies are anticipated to be the hardest hit in the medium term, facing challenges from sluggish global trade and tight financial conditions that will hinder growth.
The report suggests that, without intervention, developing economies are poised to grow by just 3.9% in 2024, more than one percentage point below the average of the previous decade. The World Bank warned that by the end of the year, about one out of every four developing countries and approximately 40% of low-income countries will still be poorer than they were in 2019, on the eve of the Covid-19 pandemic. This grim outlook prompts concerns that the world is falling short in its efforts to make the 2020s a transformative decade for addressing extreme poverty, communicable diseases, and climate change.
While acknowledging the challenges, the World Bank sees an opportunity to reverse the trend if governments act swiftly to increase investment and strengthen fiscal policy frameworks. The report suggests that comprehensive policy packages, improvements in fiscal and monetary frameworks, cross-border trade expansion, and enhanced investment climate can help developing economies navigate the slowdown and achieve various development objectives. The call for proactive measures comes as governments gather for the World Economic Forum to discuss global issues and shape policy responses.