World Bank Warns of Lowest Economy in Nearly 30 Years

The World Bank has warned of a decelerating global economy, expecting it to hit its worst half-decade since the early 1990s. Another year of slowdown in 2024 would mean the third consecutive year of sluggish growth.

Despite efforts to control inflation through higher interest rates, the global economy’s overall performance has been underwhelming. After a strong recovery from the pandemic in 2021, a slowdown began with a growth rate of 3% in 2022, which further decreased to 2.6% last year. For 2024, a mere 2.4% growth is anticipated, which is significantly below the 3.1% average of the 2010s.

This trend of poor growth is putting the 2030 development goals of the United Nations in jeopardy. Back in 2015, 193 member countries, including the United States, pledged to make transformative changes to the global economy by the end of this decade. The 17 ambitious objectives included eradicating extreme poverty and hunger, cutting greenhouse gas emissions by almost half, and enhancing education for the poor.

However, the persistent economic slump suggests a failure in achieving these targets. The consequences of this failure are evident in the world’s developing countries, where a quarter of the population is now poorer than they were pre-pandemic.

On a positive note, there has been progress in managing inflation. The global inflation rate is projected to average 3.7% in 2024, a noticeable decrease from last year’s 5.3%. However, central banks have indicated that prices may continue to rise faster than deemed advisable.

The World Bank predicts a growth rate of 1.6% for the United States this year, which is roughly double the forecast for Europe and Japan. As for China, it’s expected to grow by 4.5%, a decrease from an estimated 5.2% last year.

In the long run, weak growth is problematic for both advanced and middle-income countries. One of the reasons for this is a significant decrease in investment spending. However, according to the World Bank, “By implementing policy changes such as expanded trade and capital flows and government budget discipline, developing countries could fuel an investment boom.”

Despite the potential for positive growth, the risk of disappointment remains. Factors such as the conflict in Gaza and ongoing hostilities in Ukraine could impact global growth. Coupled with disruptions in key shipping lanes, there’s potential for an upward pressure on prices globally.