The World Bank has issued a warning of weak growth and missed opportunities in its recent economic report, projecting the weakest stretch of growth in 30 years. The report attributes this potential stagnation to slow recovery from the pandemic and ongoing conflicts in Ukraine and the Middle East. The World Bank’s semiannual Global Economic Prospects report predicts a decline in world output growth to 2.4% from 2.6% in 2024, highlighting the increased uncertainty in forecasts due to these factors.
Developing countries, in particular, are expected to bear the brunt of the slowdown, as they face high borrowing costs and anemic trade volumes. Furthermore, the report acknowledges the potential for a surge in energy prices if the Middle East war spreads, with broader implications for global activity and inflation. As the world economy faces these converging crises, some economists warn that the possibility of a wasted decade looms large unless significant changes are made.
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World Bank Report Projects Weak Growth and Wasted Opportunity
Introduction
The World Bank has released its Global Economic Prospects report, which highlights the projection of weak growth and a potential wasted opportunity in the global economy. This article will provide a comprehensive analysis of the report, covering various aspects such as the projected slowdown in world output, uncertainties resulting from wars, the Chinese economy, and natural disasters, as well as the impact on developing countries and weaknesses in the economies of Europe and the United States.
Global Economy at Risk of a “Wasted” Decade
According to the World Bank, the global economy is at risk of experiencing a wasted decade. The report describes this as a period with the weakest growth in 30 years, attributed to a sluggish recovery from the pandemic and ongoing wars in Ukraine and the Middle East. These factors are expected to have a significant impact on global output, emphasizing the need for a major course correction to avoid missed opportunities for growth.
Growth in World Output Expected to Slow
The World Bank’s report projects a further slowdown in the growth of world output in 2024. The projected growth rate is expected to decline from 2.6 percent to 2.4 percent. This decrease indicates a continuation of the trend of slower growth. The report highlights several factors contributing to the slowdown, including the impact of the wars, the weakened Chinese economy, and heightened uncertainty resulting from natural disasters caused by global warming. However, the global economy has shown resilience despite these challenges.
Uncertainty Due to Wars, Chinese Economy, and Natural Disasters
The report identifies various sources of uncertainty that impact the global economic outlook. Ongoing wars in Ukraine and the Middle East contribute to geopolitical risks, with potential for conflict escalation. This, in turn, could lead to surging energy prices, affecting global activity and inflation. The report also highlights the fragility of the Chinese economy and its impact on global growth, particularly in the context of weak consumer spending and a struggling property sector. Additionally, natural disasters resulting from global warming pose further risks and uncertainties to the economic forecast.
Weakest Half-Decade in 30 Years
The recent years have been identified as the weakest half-decade in the past three decades. This evaluation is based on a comparison with historical data, highlighting the significant underperformance of the global economy during this period. The World Bank report emphasizes the significance of this weak economic performance and the need for corrective actions to reverse the trend.
Projection of Slow Global Growth for Third Straight Year
The World Bank projects that global growth will slow for the third consecutive year in 2024. Developing countries bear the brunt of this slowdown, with the combination of high borrowing costs and anemic trade volumes creating challenges for their economies. Policymakers in these countries face the task of addressing these issues while dealing with the broader economic context.
Developing Countries Bearing the Brunt of the Slowdown
The slowdown in global growth disproportionately affects developing countries. These countries face challenges arising from high borrowing costs and reduced trade volumes. Access to credit becomes more expensive, limiting investment opportunities and hindering economic growth. Policymakers in these countries must navigate these challenges to ensure sustainable development and economic resilience.
Geopolitical Risks and Conflict Escalation
The ongoing wars and geopolitical risks pose significant threats to the global economy. Conflict escalation could lead to surging energy prices, impacting global activity and causing inflationary pressures. The recent conflict in the Middle East, coupled with the invasion of Ukraine by the Russian Federation, has intensified these risks. Policymakers and global leaders must address these conflicts and work towards resolving them to mitigate potential economic consequences.
Disruptions to Shipping Routes and Impact on Global Trade
Another factor contributing to the economic uncertainty is disruptions to shipping routes. In the past year, global trade growth has been the slowest in 50 years, apart from during recessions. The redirection of trade ships away from the Red Sea due to recent conflicts has further affected international commerce. This diversion leads to higher freight and insurance rates, as well as longer and costlier routes. Policymakers and trade organizations must navigate these disruptions to support global trade and economic growth.
Fragility in the Chinese Economy
The report highlights the fragility of the Chinese economy as a contributing factor to the global economic challenges. China’s property sector and lackluster consumer spending indicate ongoing weaknesses within the second-largest economy in the world. These weaknesses could pose headwinds for China’s trading partners in Asia, further impacting global economic performance. Addressing and resolving these issues is crucial for fostering economic stability and growth in the region.
Weak Output in Europe and the United States
The World Bank’s report projects weak economic growth in both Europe and the United States. In the euro area, economic growth is projected to rise modestly from 0.4 percent in 2023 to 0.7 percent in 2024. However, tight credit conditions are expected to constrain economic activity. In the United States, economic growth is expected to slow from 2.5 percent in 2023 to 1.6 percent in 2024. Elevated interest rates and reduced government spending are identified as the key factors influencing this slowdown. The resulting economic and political uncertainty, including the upcoming 2024 election, further dampens business investment.
In conclusion, the World Bank’s Global Economic Prospects report paints a bleak picture of weak growth and a wasted opportunity in the global economy. Factors such as ongoing conflicts, the Chinese economy, and natural disasters contribute to this challenging economic environment. Developing countries bear the brunt of the slowdown, making it vital for policymakers to address these challenges and promote sustainable development. Geopolitical risks and disruptions to shipping routes further add to the uncertainties, underscoring the need for global collaboration and conflict resolution. Weak economic performance in Europe and the United States also call for policy measures to navigate the challenging economic context. Overall, concerted efforts are required to achieve sustainable and inclusive global economic growth.
Related site – Global Economy Set for Weakest Half-Decade Performance in 30 Years (The World Bank)