The global economy is at risk of a “ruined” decade and the weakest growth rate in 30 years, the World Bank warned on Tuesday, adding that the slow recovery from the pandemic and the crippling wars in Ukraine and the Middle East will have a heavy toll. are supposed to. on output.
In its semiannual Global Economic Outlook report, the World Bank projected that world output growth will slow further in 2024, from 2.6 percent to 2.4 percent. Although the global economy has been surprisingly resilient, the report warned that its forecasts were subject to uncertainty due to two wars, the weak Chinese economy and the increased risks of natural disasters due to global warming.
Escalating crises in recent years have put the world economy on track for its weakest half in 30 years.
“Without major reforms, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, chief economist at the World Bank Group.
Global growth is projected to slow for the third consecutive year in 2024. Developing countries are bearing the brunt of the recession, with higher borrowing costs and lower trade volumes impacting their economies.
Although policymakers have made progress in bringing inflation down from 2022 highs, the war between Israel and Hamas in Gaza threatens to become a broader conflict that could push prices to a new high as oil and food costs rise. Can give rise to growth.
“Recent conflicts in the Middle East, followed by the Russian Federation’s invasion of Ukraine, have increased geopolitical risks,” the report said. “An escalation of conflict could push energy prices higher, which could have cascading effects on global activity and inflation.”
Signs of weakness in the Chinese economy also remain a matter of concern. World Bank economists said weakness in China’s property sector and a drop in consumer spending were evidence that the world’s second-largest economy will continue to underperform this year. He suggested that this could create headwinds for some of China’s trading partners in Asia.
Sugar growth rate this year is expected to slow from 5.2 percent to 4.5 percent in 2023. Outside of the pandemic-induced recession, this would be China’s slowest expansion in 30 years.
Europe and the United States are also set for another year of weak output in 2024.
The World Bank estimates that economic growth in the euro zone will accelerate from 0.4 percent in 2023 to 0.7 percent in 2024. Despite declining inflation and rising wages, tight credit conditions are expected to constrain economic activity.
Growth in the United States is expected to slow from 2.5 percent this year to 1.6 percent in 2023. The World Bank has blamed the recession on high interest rates – which are at their highest level in 22 years – and a decline in government spending. Businesses are expected to remain cautious about investing due to economic and political uncertainty, including the 2024 elections.
Despite such slow growth, Biden administration officials say they deserve credit for controlling inflation while keeping the economy running.
“I think we’ve made tremendous progress,” Treasury Secretary Janet L. Yellen told reporters on Monday. “It is very unusual to have a period in which inflation has declined so 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.”