Global Economy Bracing for Its Slowest Half-Decade Growth in Three Decades

The World Bank's latest Global Economic Prospects report paints a grim picture of the global economy, projecting the slowest half-decade of GDP growth in 30 years by the end of 2024. While the risk of a global recession has diminished, new geopolitical tensions pose fresh near-term hazards. Developing economies are particularly affected, facing slowing growth, sluggish global trade, and stringent financial conditions.

Global growth is set to decelerate for the third consecutive year, dropping from 2.6% in the previous year to 2.4% in 2024. Developing economies are expected to grow only 3.9%, over one percentage point below the previous decade's average. Low-income countries, after a disappointing performance last year, are projected to grow at 5.5%, weaker than anticipated. About one-fourth of developing countries and 40% of low-income countries are expected to remain poorer than pre-pandemic levels by the end of 2024.

Advanced economies also face a slowdown, with growth dropping from 1.5% in 2023 to 1.2% this year. The World Bank warns that without a major course correction, the 2020s could be remembered as a wasted decade, hindering progress on global priorities. To address this, the report recommends accelerating investment and strengthening fiscal policy frameworks. To tackle climate change and achieve global development goals by 2030, developing countries need a substantial increase in investment—approximately $2.4 trillion annually. However, the report suggests that without a comprehensive policy package, achieving this is unlikely. Per capita investment growth in developing economies is expected to average 3.7% between 2023 and 2024, just over half the rate of the previous two decades.

The report outlines the potential benefits of sustained investment booms in developing economies, emphasizing the need for comprehensive policy packages to improve fiscal and monetary frameworks, enhance trade and financial flows, improve the investment climate, and strengthen institutions. It also identifies measures for commodity-exporting developing economies to avoid boom-and-bust cycles, including disciplined fiscal frameworks, flexible exchange-rate regimes, and the creation of rainy-day funds.

Implementing these measures could boost per capita GDP growth by up to 1 percentage point every four or five years.