Business Bayani PH

The world is heading for the slowest economic growth in 30 years, according to a new report from the World Bank. The report highlights that despite some improvements, the global economy is still facing significant challenges, with developing countries being hit the hardest.

The report predicts that by the end of 2024, we will see the slowest half-decade of economic growth in three decades. While the risk of a global recession has eased, thanks in part to a strong United States economy, rising tensions between nations could create new problems. Developing economies, in particular, are struggling due to slow growth in major economies, sluggish global trade, and tough financial conditions.

In 2024, global trade growth is expected to be only half of what it was before the pandemic. Developing countries, especially those with poor credit ratings, are likely to continue facing high borrowing costs as global interest rates stay at four-decade highs when adjusted for inflation.

The report reveals a global growth slowdown for the third year in a row, dropping from 2.6% last year to 2.4% in 2024. Developing economies are expected to grow by only 3.9%, more than a percentage point below the previous decade’s average. Low-income countries are predicted to grow at 5.5%, weaker than expected.

Indermit Gill, chief economist at the World Bank, warns, “Without a major course correction, the 2020s will go down as a decade of wasted opportunity.” He stresses the urgent need for action to avoid many developing countries, especially the poorest, getting stuck in a cycle of high debt and limited access to food.

To tackle climate change and meet global goals by 2030, developing countries must significantly increase investment, needing around $2.4 trillion annually. Without comprehensive policy measures, the report estimates that per capita investment growth in developing economies will only be 3.7% between 2023 and 2024, half the rate of the previous two decades.

Ayhan Kose, deputy chief economist at the World Bank, emphasizes the potential impact of investment booms in developing economies. He stresses the importance of comprehensive policy packages to improve fiscal and monetary frameworks, boost cross-border trade, improve the investment climate, and strengthen institutions.

The report also addresses challenges faced by two-thirds of developing countries, particularly those relying on commodity exports. It points out issues where fiscal policies tend to worsen economic ups and downs. The report suggests that adopting disciplined fiscal frameworks, flexible exchange-rate regimes, and avoiding restrictions on international capital movement could help these countries boost economic growth.

Turning to the East Asia and Pacific (EAP) region, the report predicts a slowdown, with growth expected to be 4.5% in 2024 and 4.4% in 2025. Ongoing weaknesses in the real estate sector, challenges in export sectors, and fluctuating consumer confidence contribute to this slowdown.

The report concludes by highlighting the risks to the global economy, such as potential weaker-than-expected growth in China, heightened geopolitical tensions, and conflicts disrupting energy supply. On a positive note, stronger-than-expected growth in the U.S. could present an upside to the forecast.

In the face of one of the most challenging periods for the global economy, the World Bank urgently calls for governments to take strategic actions. The report provides a roadmap to navigate these difficult times and prevent the 2020s from becoming a lost decade.◼