The global economy will slow for the third year in a row in 2024: the World Bank
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 world economy will grow only 2.4 percent this year. That would be down from growth of 2.6 percent in 2023, 3 percent in 2022 and a galloping 6.2 percent 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, chief economist at the World Bank. 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 that 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 percent 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 percent 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 percent.
Higher rates also dampen global inflation, which the World Bank projects will fall to 3.7 percent in 2024 and 3.4 percent in 2025 from 5.3 percent 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 percent this year and 4.3 percent in 2025, down sharply from 5.2 percent 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 twenty countries that share the euro to achieve growth of 0.7 percent this year, a modest improvement from last year’s growth of 0.4 percent. Japan’s economy is expected to grow just 0.9 percent, half the pace of expansion in 2023.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: January 9, 2024 | 9:47 PM IST