The global economy is at risk of a “wasted” decade and the weakest streak of growth in 30 years, the World Bank warned on Tuesday, saying the slow recovery from the pandemic and devastating wars in Ukraine and the Middle East are expected East weighs a lot. at the exit.
In its semiannual World Economic Prospects report, the World Bank projected that global output growth will slow further in 2024, falling 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 greater uncertainty due to the two wars, a diminished Chinese economy and increasing risks of natural disasters caused by global warming.
The converging crises of recent years have led the world economy towards its weakest five-year period in 30 years.
“Without a major course correction, the 2020s will go down in history as a decade of wasted opportunities,” said Indermit Gill, chief economist at the World Bank Group.
Global growth is expected to slow for the third consecutive year in 2024. Developing countries are hardest hit by the slowdown, with high borrowing costs and anemic trade volumes weighing on their economies.
Although authorities have made progress in reducing inflation from its 2022 peak, the war in Gaza between Israel and Hamas threatens to escalate into a broader conflict that could trigger a new bout of price increases by causing the cost of goods to rise. oil and food.
“The recent conflict in the Middle East, coupled with the Russian Federation’s invasion of Ukraine, has increased geopolitical risks,” the report says. “The escalation of the conflict could lead to a rise in energy prices, with broader implications for global activity and inflation.”
Signs of fragility in the Chinese economy also remain a cause for concern. World Bank economists pointed to persistent weakness in China’s real estate sector and lackluster consumer spending as evidence that the world’s second-largest economy will continue to underperform this year. They suggested this could pose obstacles for some of China’s trading partners in Asia.
Chinese growth is expected to slow to 4.5 percent this year from 5.2 percent in 2023. Aside from the pandemic-induced slowdown, that would be China’s slowest expansion in 30 years.
Europe and the United States are also set for another year of weak production in 2024.
The World Bank projects that economic growth in the euro area will rise to 0.7 percent in 2024 from 0.4 percent in 2023. Despite declining inflation and rising wages, it is expected to Strict credit conditions limit economic activity.
Growth in the United States is expected to slow to 1.6 percent this year from 2.5 percent in 2023. The World Bank attributes the slowdown to high interest rates, which are at their highest level in 22 years. , already a decline in public spending. Companies are expected to be cautious about investing due to economic and political uncertainty, including around the 2024 elections.
Despite such slow growth, Biden administration officials say they deserve credit for taming inflation while keeping the economy afloat.
“I think we’ve made tremendous progress,” Treasury Secretary Janet L. Yellen told reporters Monday. “It’s very unusual to have a period where inflation declines so much while the labor market remains strong.”
He added: “But that’s what we’re seeing, and that’s why I say we’re enjoying a soft landing.”
