The World Bank released its semi-annual Global Economic Prospects Report on 10 January, and it reads like a warning shot across the bow for the world’s economies.
Global economic growth will continue slowing in 2024 for the third consecutive year, threatening the weakest half-decade of growth since the early 1990s. This will be driven by advanced economies’ sluggish growth under tightened monetary policy, China’s structurally driven slowdown, and weak international trade. While other emerging and developing economies besides China are set for a slight bump in growth rates in the year ahead, this remains well below pre-pandemic averages and follows only a “modest” rebound from recent economic shocks.
Source: World Bank
There is some good news, however. Global inflation is continuing to fall. Some major emerging market and developing economies (EMDEs) have returned to pre-pandemic growth rates, looking well positioned to leverage an expected rebound in global demand and international trade from 2025 onwards.
The path towards a brighter recovery is narrow and will require adept economic decision-making along the way. With a record two billion people preparing to vote for new governments in the world’s democracies this year, concerted economic reform and growth plans are possible, although equally plausible is a widespread turn to populist and nationalistic programs.
The global economy is expected to grow by 2.4% this year, down from 2.6% in 2023. The US growth forecast was upgraded by 0.8% to 1.6% in 2024 given surprisingly resilient economic activity despite monetary policy tightening. The Euro area’s growth forecast was lowered by 0.6% to only 0.7%. The economic bloc slowed sharply in the second half of 2023 as the shock from the invasion of Ukraine, led by energy price inflation, and interest rate rises weighed on activity. This malaise is expected to continue through 2024.
China had unexpectedly sluggish growth in 2023 after a post-pandemic rebound left much to be desired and is forecast to continue slowing to well below pre-pandemic growth rates over 2024–25. As a trade-intensive economy, this is set to affect trade growth, especially in the East Asia and Pacific regions.
Despite the recent conflict in the Middle East (ME), most commodity prices declined in 2023 due to moderating demand, but they remain above pre-pandemic levels. Currently, Organization of the Petroleum Exporting Countries + (OPEC+) spare capacity stands at just over 5 million barrels per day (Mb/d). However, oil prices were highly volatile in the second half of 2023 amid OPEC+ production cuts and the ME conflict. Historical precedent suggests that an escalation of the conflict could pose a major upside risk to oil prices.
Metal prices fell in 2023, owing to sluggish demand from major economies, notably China. Food commodity prices moderated as well, reflecting improved supplies for major crops. Consumer food price inflation has eased but remains elevated.
Source: World Bank
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