IMF says projections for the next five years are the lowest since the inception of globalization in the 1990s. In its 2024 projections, the organization foresees a mere 2.4% expansion in global GDP, down from 2.6% in the previous year. This marks the third consecutive year of weaker growth. The World Bank attributes this slowdown to increased borrowing costs and geopolitical tensions affecting output. It warns of a potential decade of missed opportunities without significant corrections. Global trade growth in 2024 is expected to be only half the pre-pandemic decade's average. Developing countries have seen a drop in average annual growth to 3.9% since 2020, a full percentage point lower than the prior decade. Advanced economies are projected to grow by just 1.2%, down from 1.5% in 2023. The World Bank emphasizes the need for increased investment, highlighting its transformative potential in raising living standards.
Impact on UN Development Goals
This continuing deceleration raises concerns about meeting the 2030 development goals agreed upon by 193 United Nations members. Governments pledged to transform the global economy by addressing ambitious aims, including eliminating extreme poverty and reducing greenhouse gas emissions. The World Bank warns of a decade of missed opportunities if corrective measures are not implemented.
Unequal Economic Recovery
While celebrating progress in controlling inflation globally, the bank highlights that a quarter of the world's developing countries are poorer now than pre-pandemic. Despite inflation averaging 3.7% this year (down from 5.3% in 2023), ongoing conflicts and disruptions in the Middle East pose potential challenges to sustained recovery.
Regional Variances and Policy Recommendations
The forecast indicates varied growth rates, with the U.S. expected to grow at 1.6%, twice as fast as Europe or Japan. China's growth is projected at 4.5%, down from 5.2% in the previous year. To address the economic slowdown, the World Bank suggests policy changes, such as expanded trade, capital flows, and government budget discipline, particularly emphasizing the importance of developing countries fueling an investment boom.
Potential Threats to Outlook
The bank warns of potential threats to the economic outlook, including the war in Gaza and ongoing hostilities in Ukraine, which could impact global growth. Escalation of Middle East conflicts might raise oil prices and disrupt global trade routes, affecting the already delicate economic recovery. The report underscores the importance of monitoring geopolitical events and addressing potential disruptions to ensure sustained economic progress.
- Be Prepared for Slower Global Economic Growth: Understand that the global economy is expected to slow down for the third consecutive year, affecting various aspects of financial markets and trade.
- Monitor Inflation Trends: Keep an eye on inflation rates, which are expected to average 3.7% this year. This impacts the cost of living and can influence your budget and spending decisions.
- Diversify Investments: Given the varied growth rates in different regions, consider diversifying your investments. While the U.S. is expected to grow at 1.6%, other regions may have different trajectories, affecting investment returns.
- Stay Informed on Geopolitical Events: Be aware of ongoing geopolitical tensions, such as conflicts in the Middle East, as they can impact oil prices and global trade routes. These events might have repercussions on your investments and daily expenses.
- Review Long-Term Financial Goals: With the global economy facing uncertainties, reassess your long-term financial goals. It's essential to adapt your financial plans based on the changing economic landscape.