World Bank Warns Global Economy Set for Weakest Growth Since Pandemic, Hitting Poorer Nations Hardest

By Jace Dela Cruz

Jan 10, 2024 04:53 AM EST

Global economic growth is expected to decelerate for the third straight year in 2024, extending poverty and crippling debts in many developing countries, the World Bank warned on Tuesday.

Considering the challenges, such as soaring interest rates, persistent inflation, and dwindling trade around the world, the World Bank predicted that the world economy would expand only 2.4% this year, compared to 2.6% in 2023, 3% in 2022 and 6.2% in 2021, when there was a rebound as the pandemic ended, the Associated Press reported.

By the end of 2024, the development lender noted that people in about one of every four developing countries and around 40% of low-income countries will still be poorer than they were on the eve of the COVID-19 pandemic in 2019. 

(Photo : FREDERIC J. BROWN/AFP via Getty Images)
The Xweather from Vaisala offers a spinning globe showing real-time worldwide weather patterns on display at the Consumer Electronics Show (CES) on January 9, 2024 in Las Vegas, Nevada.

World Bank Forecasts Global Growth to Slow in 2024 

The World Bank said the growth this year is seen to be the weakest since the global financial crisis of 2009, excluding the pandemic's sharp contraction of economic activity and substantial job losses in 2020. It forecasts global growth in 2025 is slightly higher at 2.7%.

World Bank officials have expressed worry that heavily indebted poor countries cannot afford to make needed investments to fight poverty.

In a statement, Indermit Gill, the World Bank's chief economist, said: "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."

"That would obstruct progress on many global priorities. Opportunities still exist to turn the tide. This report offers a clear way forward: it spells out the transformation that can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks," Gill added.

Despite the relatively positive note that the global recession risk has diminished, the report highlighted fresh concerns emerging from geopolitical tensions. 

The medium-term outlook for developing economies appears dim, marked by slowing growth in major economies, sluggish global trade, and the tightest financial conditions in decades. Global trade growth in 2024 is predicted to be only half the average of the pre-pandemic decade. 

The report also emphasized the challenges faced by developing economies, particularly those with poor credit ratings, as borrowing costs are expected to remain high with global interest rates at four-decade highs in inflation-adjusted terms.

READ ALSO: Goldman Sachs Says Global Economic Growth in 2024 Will Exceed Expectations

Slower Growth for the US

Between 2023 and 2024, per capita investment growth in developing economies is expected to average only 3.7%, only over half the rate of the previous two decades.

The World Bank has also projected slower growth for the US, reducing from 2.5% in 2023 to 1.6% in 2024, as higher interest rates weaken borrowing and spending.

China's growth is also predicted to slow, with a forecast of 4.5% in 2024, which marks its slowest expansion in more than three decades outside of the pandemic-affected years of 2020 and 2022.

Ayhan Kose, the World Bank's Deputy Chief Economist and Director of the Prospects Group, said: "Investment booms have the potential to transform developing economies and help them speed up the energy transition and achieve a wide variety of development objectives." 

To spark such booms, Kose noted that "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."

"That is hard work, but many developing economies have been able to do it before. Doing it again will help mitigate the projected slowdown in potential growth in the rest of this decade," he added.

READ MORE: IMF, World Bank Approve Historic $4.5 Billion Debt Relief for Somalia

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