The World Bank warned on Tuesday (January 9th) that global economic growth will slow for the third consecutive year in 2024, and poverty and debt levels in many developing countries will continue to deteriorate.
The World Bank wrote in its latest Global Economic Outlook report that it expects the global GDP growth rate to be 2.4% in 2024, compared to 2.6% in 2023 and 3.0% in 2022; In addition, the World Bank has lowered its global GDP growth forecast for 2025 from 3% to 2.7%.
The report pointed out that the first five years of the 1920s seemed to be the worst five years in the past 30 years due to the COVID-19 pandemic, geopolitical tensions and the consequent global inflation and interest rate surge.
Faced with bleak expectations, Ayhan Kose, Deputy Chief Economist of the World Bank, stated that even the 2008 financial crisis, the Asian financial crisis of the 1990s, and the economic downturn of the early 21st century had significantly higher economic growth rates than in recent years.
Kose added that, except for the special year 2020 (during the pandemic), this year's economic growth rate will be the weakest since the global financial crisis.
In addition, due to the continued escalation of geopolitical crises hindering economic activities, the World Bank predicts that the goal of eliminating extreme poverty by 2030 is currently largely unattainable.
"If significant adjustments are not made, the 1920s will be seen as a decade of wasted opportunities," said Indermint Gill, Chief Economist of the World Bank, in a statement
Gill claims that economic growth will remain weak in the short term, causing many developing countries, especially the poorest ones, to be in dire straits with unacceptably high debt levels, and almost one in three people struggling to access food.
Increase investment
In developed countries, due to reduced savings and restrictive monetary policies suppressing economic activity, the World Bank predicts that the US economy will grow by 1.6% in 2024, but this is twice the estimate from June last year.
The economic outlook for the eurozone is relatively bleak, with an expected growth rate of 0.7% this year, as high energy prices have led to a growth of only 0.4% in 2023.
As a whole, emerging markets and developing countries are expected to grow by 3.9% this year, lower than the 4.0% in 2023. This speed is not enough to lift the growing population out of poverty. The World Bank has stated that by the end of 2024, approximately a quarter of people in developing countries and 40% in low-income countries will be even poorer than before the outbreak of the pandemic in 2019.
The World Bank stated that as a way to promote economic growth, especially in emerging markets and developing countries, it will require an annual investment of $2.4 trillion to accelerate the transition to clean energy and adapt to climate change.
Kose believes that the investment boom may change developing economies, helping them accelerate their energy transition and achieve various development goals. "To stimulate such prosperity, developing economies need to implement comprehensive policy plans to improve fiscal and monetary frameworks, expand cross-border trade and capital flows, and improve the investment environment. This is a daunting task, but many developing economies have been able to do so before."
For commodity exporting countries, the World Bank recommends adopting a "countercyclical investment strategy", which means that fiscal policies can be relatively conservative during periods of economic prosperity, and increase investment during periods of economic downturn to avoid extreme cycles of prosperity and depression.