The global economy risks a “wasted” decade and a period of weakest growth in 30 years, the World Bank warned on Tuesday, saying a slow recovery from the pandemic and crippling wars in Ukraine and the Middle East is expected weigh heavily. output.
In its biannual Global Economic Outlook report, the World Bank forecasts that global output growth will slow further in 2024, from 2.6% to 2.4%. Although the global economy has shown surprising resilience, the report warns that its forecasts are subject to increased uncertainty due to two wars, the decline of the Chinese economy and the growing risks of natural disasters caused by global warming.
The converging crises of recent years have put the global economy on track for its weakest half-decade in 30 years.
“Without a major course change, the 2020s will be seen as a decade of wasted opportunities,” said Indermit Gill, chief economist of the World Bank Group.
Global growth is expected to slow for a third consecutive year in 2024. Developing countries are bearing the brunt of the slowdown, with high borrowing costs and anemic trade volumes weighing on their economies.
Although policymakers have made progress in bringing inflation down from its 2022 peak, the war in Gaza between Israel and Hamas threatens to morph into a broader conflict that could trigger another surge in prices in causing a surge in the price of oil and food products.
“The recent conflict in the Middle East, coupled with the Russian Federation’s invasion of Ukraine, has increased geopolitical risks,” the report said. “The escalation of the conflict could lead to higher energy prices, with wider implications for global activity and inflation. »
Signs of fragility in the Chinese economy also remain worrying. World Bank economists have pointed to continued weakness in China’s real estate sector and weak consumer spending as evidence that the world’s second-largest economy will continue to underperform this year. They suggested this could pose a barrier to some of China’s trading partners in Asia.
China’s growth is expected to slow to 4.5% this year, from 5.2% in 2023. Aside from the pandemic-induced slowdown, this would be China’s slowest expansion in 30 years.
Europe and the United States are also poised for another year of low production in 2024.
The World Bank forecasts that economic growth in the euro zone will reach 0.7% in 2024, compared to 0.4% in 2023. Despite slowing inflation and rising wages, tighter credit conditions are expected to limit growth. ‘economic activity.
In the United States, growth is expected to slow to 1.6% this year, from 2.5% in 2023. The World Bank attributes the slowdown to high interest rates – which are at their highest level in 22 years – and to a decline in public spending. Businesses should be cautious when investing due to economic and political uncertainty, particularly around the 2024 elections.
Despite such slow growth, Biden administration officials say they deserve credit for keeping inflation in check while keeping the economy afloat.
“I think we’ve made tremendous progress,” Treasury Secretary Janet L. Yellen told reporters Monday. “It is very unusual to have a period in which inflation falls this much while the labor market remains strong.”
She added: “But that’s what we’re seeing, and that’s why I say we’re enjoying a soft landing. »