…anchors prediction on high interest rate, slumping trade
The World Bank has predicted a slower growth rate for the global economy in 2024, with the global development finance institution anchoring its new year prediction on high interest rate, persistent inflation, slumping trade and not-too-impressive economic news emanating from China, the second largest economy in the world, the World Bank has stated in its latest report, titled “Global Economic Prospects 2024.”
According to the World Bank, the global economy will grow by 2.4 percent in 2024, which is 0.2 percent lower than the 2.6 percent growth rate recorded in 2023; 0.6 percent lower than the 3 percent growth rate of 2022, and far lower than the 6.2 percent growth rate of 2021.
“Global growth is projected to slow for the third year in a row—from 2.6% last year to 2.4% in 2024, almost three-quarters of a percentage point below the average of the 2010s. Developing economies are projected to grow just 3.9%, more than one percentage point below the average of the previous decade.
“After a disappointing performance last year, low-income countries should grow 5.5%, weaker than previously expected. By the end of 2024, people in about one out of every four developing countries and about 40% of low-income countries will still be poorer than they were on the eve of the COVID pandemic in 2019. In advanced economies, meanwhile, growth is set to slow to 1.2% this year from 1.5% in 2023,” the World Bank stated.
According to Quartz, the rising tensions in the Middle East following the outbreak of war between Hamas and Israel, as well as the unending Ukrainian conflict, will contribute to the weaker global growth.
Latest developments from the Israel-Hamas conflict in the Middle East have led to the disruption of trade on the Red Sea, which is the strait of Bab al-Mandab that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula.
According to the BBC, 17,000 ships go through the Suez Canal each year, implying about 12 percent of the global trade passes through the Red Sea, with value estimated at $1 trillion worth of goods annually.
Continents that will feel the immediate impact of the disruption include Europe, the Middle East and North Africa as 15 percent of goods and 21.5 percent of refined oil transit the Red Sea to the aforementioned regions annually. Maersk, one of the leading global shipping companies recently announced a pause on movement of its ships across the Red Sea.
Commenting on the latest global forecast, World Bank Group’s Chief Economist and Senior Vice President, Indermit Gill, said without a major correction, the 2020s will go down as a period of wasted opportunity even as the near-term growth remains weak.
He said: “Without a major course correction, the 2020s will go down as a decade of wasted opportunity. 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.”
Notwithstanding, there are policies developing countries such as Nigeria could implement to spur a boom in their growth, most especially, fiscal policy frameworks. It added that developing countries will have to tackle climate change, and achieve other key global development goals by 2023, noting that there has to be formidable increase in investments, about $2.4 trillion per year.
“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, 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,” Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group, said.
