Global economy will rack up a sorry record by the end of 2024: World Bank report

The global economy has recovered from last year after the impact of global recession fears was factored in. However, a World Bank report said that 2020s will go down as a decade of wasted opportunity on January 9, 2023. The global economy is set to “rack up a sorry record by the end of 2024 —the slowest half-decade of GDP growth in 30 years,” according to the World Bank’s latest Global Economic Prospects report.

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “Near-term growth will remain weak, leaving many developing countries—especially the poorest—stuck in a trap: with paralyzing levels of debt and tenuous access to food for nearly one out of every three people. That would obstruct progress on many global priorities. Opportunities still exist to turn the tide. This report offers a clear way forward: it spells out the transformation that can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks.”

Developing countries most impacted

Global growth is projected to slow for the third consecutive year, reaching 2.4 per cent in 2024, down from 2.6 per cent in 2023. Among global economies, developing countries’ economies will be hit harder, growing at just 3.9 per cent, far below their pre-pandemic average. Low-income countries will also see weaker growth than anticipated, at 5.5 per cent. By 2024 end, 25 per cent of developing countries and 40 per cent of low-income countries will still be poorer than in 2019 pre-pandemic levels. At the same time, the picture does not look well for developed countries, either. Growth in advanced economies will also slow, reaching 1.2 per cent in 2024 from 1.5 per cent in 2023.

South Asia’s economic outlook: Mixed bag with India shining

India’s growth is anticipated to edge up to 6.4 per cent in FY2024-25, fueled by robust public investment and healthier corporate finances. Investments might show a slight slowdown but remain strong overall. Bangladesh’s growth is seen dipping to 5.6 per cent in FY2023-24. High inflation and import restrictions could dampen private consumption and investment.

Maldives island nation’s economy will be buoyed by increased investment in the tourism sector, with growth expected to grow at 5.2 per cent for FY 2024. Pakistan’s growth outlook remained muted. Meanwhile, Sri Lanka was shrouded as an island nation as debt restructuring negotiations, especially with private creditors, are ongoing.

2023: A rear of global trade stagnation

Global trade in goods and services grew by a meagre 0.2 per cent in 2023, marking the slowest expansion outside of global recessions in 50 years. Meanwhile, global trade is projected to grow by 2.3 per cent in 2024, mirroring expected global output growth. Goods trade actually contracted, impacted by declines in key advanced economies and a slowdown in emerging and developing economies. But the report mentioned that the supply chain disruptions eased significantly, returning to pre-pandemic levels. Services trade also lost momentum in the second half of 2023. The 2021-2024 trade recovery period will be the weakest following a global recession in the past 50 years.

Also Read | Red Sea attacks send shockwaves through Indian exim business; container costs up 400%; freight rates soar

What are the factors behind the slowdown of the global economy?

The global economic forecast for 2024 is casting a long shadow, with numerous downside risks threatening to derail any potential recovery. The recent Middle East conflict, adding fuel to the fire ignited by the Ukraine war, has stoked geopolitical tensions to dangerous levels.

Once a reliable shipping route, the Red Sea has morphed into a treacherous gauntlet for Indian businesses. Recent attacks on cargo ships have sent shockwaves through exporters and importers, who are now battling a perfect storm of skyrocketing container prices, stretched transit times, and a paralyzing climate of uncertainty. With container costs surging by up to 400 per cent and routes diverted around Africa, Indian exports face a double whammy of competitiveness loss and logistical nightmares, Mint reported earlier.

A flare-up in any of these conflicts could send energy prices skyrocketing, triggering domino effects on global activity and inflation. Rising real interest rates, aimed at taming inflation, could trigger financial stress, especially in vulnerable economies.