The World Bank predicts that global GDP growth will be the slowest in three decades, falling to 2.4% for the third consecutive year in 2024.
Developing countries face a bleak outlook due to slowing growth in major economies, weak global trade and tightening financial conditions.
By the end of 2024, more than 40% of people in low-income countries will live in poverty above pre-COVID levels.
The World Bank’s latest Global Economic Prospects report paints a bleak picture of the global economy in the mid-2020s, predicting that gross domestic product will grow at its slowest half-decade in the past 30 years. While the risk of a global recession has diminished, largely due to the strength of the U.S. economy, rising geopolitical tensions pose new short-term risks.
The medium-term prospects for many developing countries are particularly bleak due to slowing growth in major economies, weak global trade and some of the tightest financial conditions in recent history.
Global growth is expected to decelerate for the third consecutive year, from 2.6% the previous year to 2.4% in 2024. That figure is nearly three-quarters of a percentage point lower than the 2010s average. Growth in developing economies is likely to be just 3.9%, more than a percentage point below the average of the previous decade. Growth in low-income countries will be 5.5%, lower than expected. By the end of 2024, about a quarter of the population in developing countries and 40% of people in low-income countries will be poorer than before the COVID-19 pandemic.
Indermit Gill, Chief Economist and Senior Vice President, World Bank Group Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group, emphasized the need for significant policy changes. “Without significant adjustments, the 2020s may be viewed as a decade of missed opportunities,” he said. High debt and limited food supplies have plunged many developing countries into poverty. Gill called for immediate action to boost investment and strengthen fiscal policy.
To combat climate change and achieve key global development goals by 2030, developing countries must significantly increase investment, estimated at around $2.4 trillion per year. However, such growth seems unlikely without comprehensive policy measures. It is predicted that per capita investment growth in these economies will average only 3.7% between 2023 and 2024, only half of what it was over the past two decades.
The World Bank report provides the first global analysis of the conditions needed to create a sustained investment boom. The report shows that developing economies can achieve huge economic benefits by maintaining a per capita investment growth rate of at least 4% for six years or more. Such prosperity could accelerate integration with advanced economies, reduce poverty more quickly, and significantly increase productivity growth.
Ayhan Kose, Deputy Chief Economist and Director of the Outlook Group at the World Bank, highlighted the transformative potential of the investment boom. “To ignite these upsurges, developing economies need a comprehensive policy package focused on fiscal and monetary reforms, expanding trade, improving the investment climate and improving institutional quality,” Kose said. He stressed that these steps were challenging but achievable, as evidenced by past successes in many developing economies.
The report also explores the problems facing commodity-exporting developing countries, which often experience heightened boom and bust cycles as a result of government fiscal policies. The report suggests that these countries can improve their growth prospects by adopting stricter fiscal frameworks, flexible exchange rate regimes and open international capital flow policies. In addition, establishing sovereign wealth funds and emergency reserves can provide critical support in the event of an economic downturn.
</p
