WASHINGTON — Hampered by high interest rates, persistent inflation, declining trade and a declining China, the global economy will slow for a third consecutive year in 2024.
That is the picture painted by the World Bank, which predicted on Tuesday that the global economy will grow only 2.4% this year. That would be down from growth of 2.6% in 2023, 3% in 2022 and a galloping 6.2% in 2021, which reflected the robust recovery from the 2020 pandemic recession.
Increased global tensions, mainly arising from Israel’s war with Hamas and the conflict in Ukraine, carry the risk of even weaker growth. And World Bank officials express concern that heavily indebted poor countries cannot afford to make the necessary investments to fight climate change and poverty.
“Short-term growth will remain weak, leaving many developing countries – especially the poorest – trapped: with crippling debt and weak access to food for almost one in three people,” said Indermit Gill, head of the World Bank. economist, said in a statement.
In recent years, the international economy has proven surprisingly resilient in the face of one shock after another: the pandemic, the Russian invasion of Ukraine, the resurgence of global inflation and the oppressive interest rates imposed by central banks in an attempt to regain control over price increases. to get. . The World Bank now says the global economy will grow half a percentage point faster in 2023 than it forecast in June and concludes that “the risk of a global recession has declined.”
Leading the way in 2023 was the United States, which was likely to post 2.5% growth last year – 1.4 percentage points faster than the World Bank expected mid-year. The World Bank, a 189-nation anti-poverty agency, expects U.S. growth to slow to 1.6% this year as higher interest rates weaken lending and spending.
The Federal Reserve has raised US interest rates eleven times since March 2022. Her strenuous efforts have helped push U.S. inflation from a 40-year high it reached in mid-2022 to near the Fed’s target level of 2%.
Higher interest rates also dampen global inflation, which the World Bank projects will fall to 3.7% in 2024 and 3.4% in 2025 from 5.3% last year, but still above pre-pandemic averages.
China’s economy, the world’s second largest after the United States, is expected to grow 4.5% this year and 4.3% in 2025, down sharply from 5.2% last year. The Chinese economy, a leading engine of global growth for decades, has sputtered in recent years: its overbuilt real estate market has imploded. Consumers are depressed, while youth unemployment is rampant. And the population is aging, undermining growth capacity.
Slowing growth in China is likely to impact developing countries that supply the Chinese market with raw materials, such as coal-producing South Africa and copper-exporting Chile.
The World Bank expects the 20 countries that share the euro to achieve growth of 0.7% this year, a modest improvement from last year’s growth of 0.4%. Japan’s economy is expected to grow just 0.9%, half the pace of expansion in 2023.