According to a new report from the World Bank, the global economy will experience its worst half-decade of economic growth in 30 years.
Indeed, the organization recently released its Global Economic Prospects report, in which it made a number of predictions for the world economy over the next several years. Global growth is expected to slow for the third straight year in 2024, falling to 2.4% from 2.6% in 2023.
Growth is then projected to rise to 2.7% in 2025, meaning the five-year period from 2020-2025 will be almost 0.75% lower than the average rate of the 2010s.
Reasonably so, the organization cites a number of global headwinds collectively leading to weaker growth. Absent a “major course correction,” the 2020s may wind up “a decade of wasted opportunity,” said World Bank chief economist Indermit Gill.
“You have a war in Eastern Europe, the Russian invasion of Ukraine. You have a serious conflict in the Middle East. Escalation of these conflicts could have significant implications for energy prices that could have impacts on inflation as well as on economic growth,” Ayhan Kose, deputy chief economist and director of the Prospects Group at the World Bank, told CNBC.
The World Bank Expects Developing Economies to Weaken
While developed countries in North America, Europe, and Central Asia are expected to experience slowed growth due to China-related roadblocks, developing economies are expected to undergo the brunt of the slowdown.
“Near-term growth will remain weak, leaving many developing countries — especially the poorest — stuck in a trap: with paralyzing levels of debt and tenuous access to food for nearly one out of every three people,” Gill said.
Developing economies are forecasted to grow 3.9% in 2024, down 1% from the average in the 2010s. By year-end, 1 in 4 people in developing countries and 40% of low-income countries will be poorer than they were prior to the pandemic in 2019.
The bank called on governments to work quickly to rework fiscal policy in order to tackle the poverty, disease, and climate change-related shortcomings that are currently on track to be largely unchanged in the 2020s. Such a change would require substantial “investment booms,” as Gil notes:
“To spark such booms, developing economies need to implement comprehensive policy packages to improve fiscal and monetary frameworks, expand cross-border trade and financial flows, improve the investment climate, and strengthen the quality of institutions.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
