Global economy heading for weakest half-decade of growth in 30 years, World Bank warns

The global economy is on course to record its weakest half-decade of growth in 30 years, the World Bank has warned.

While the risk of a global recession has receded, largely because of the strength of the US economy, the Washington-based institution said “mounting geopolitical tensions could create fresh near-term hazards”.

Global growth is projected to slow for the third year in a row – from 2.6 per cent last year to 2.4 per cent in 2024, almost three-quarters of a percentage point below the average that persisted in the 2010s, the bank said in its latest half-yearly report.

“The medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade and the tightest financial conditions in decades,” it said.

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The World Bank’s latest global economic prospects report, which focuses mainly on the outlook for the less-advanced economies, highlighted borrowing costs for developing economies – especially those with poor credit ratings – as a potential flashpoint. It noted borrowing costs were likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms.

Developing economies were collectively projected to grow just 3.9 per cent this year, more than one percentage point below the average of the previous decade, it said.

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By the end of 2024, people in one out of every four developing countries and about 40 per cent of low-income countries will still be poorer than they were on the eve of the Covid pandemic in 2019, it said. In advanced economies, growth is set to slow to 1.2 per cent this year from 1.5 per cent in 2023.

To tackle climate change and achieve other key global development goals by 2030, the bank warns that developing countries need to deliver “a formidable increase in investment – about $2.4 trillion (€2.2 trillion) per year”.

Without a comprehensive policy package, prospects for such an increase “are not bright”, it said.

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“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. “Near-term growth will remain weak, leaving many developing countries – especially the poorest – stuck in a trap: with paralysing levels of debt and tenuous access to food for nearly one out of every three people,” he said.

“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,” he said

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