World economy set for slowest growth in 3 decades: World Bank

The medium-term outlook is particularly grim for many developing nations, hindered by slower growth in major economies, sluggish global trade, and the tightest financial conditions in recent history.

Projected global growth is expected to decelerate for the third consecutive year, from 2.6 per cent in the previous year to 2.4 per cent in 2024. This figure falls almost three-quarters of a percentage point below the average of the 2010s. Developing economies are likely to see growth rates of just 3.9 per cent, over one percentage point below their previous decade's average. Low-income countries are set to experience a modest 5.5 per cent growth, weaker than anticipated. By the end of 2024, approximately one in four people in developing countries and 40 per cent in low-income countries will be poorer than before the COVID-19 pandemic.

Indermit Gill, chief economist and senior vice president of the World Bank Group, stressed the need for significant policy changes. "Without major adjustments, the 2020s could be remembered as a decade of missed opportunities," he remarked. High debt levels and limited access to food are trapping many developing countries in poverty. Gill calls for immediate action to bolster investment and strengthen fiscal policies.

To address climate change and achieve key global development goals by 2030, developing countries must substantially increase their investments, estimated at about $2.4 trillion annually. However, without a comprehensive policy approach, such an increase appears unlikely. Per capita investment growth in these economies is forecasted to average just 3.7 per cent between 2023 and 2024, barely half the rate of the previous two decades.

The World Bank report provides the first global analysis of what is required to generate a sustained investment boom. It shows that developing economies can achieve significant economic benefits by maintaining per capita investment growth of at least 4 per cent over six years or more. Such booms can accelerate convergence with advanced economies, reduce poverty more rapidly, and significantly increase productivity growth.

Ayhan Kose, deputy chief economist and director of the Prospects Group at the World Bank, highlights the transformative potential of investment booms. "To ignite these booms, developing economies need comprehensive policy packages focusing on fiscal and monetary reforms, trade expansion, investment climate improvements, and institutional quality enhancement," Kose stated. He emphasised that these steps are challenging but achievable, as evidenced by past successes in many developing economies.

The report also addresses the issues faced by commodity-exporting developing countries, which often experience intensified boom-and-bust cycles due to government fiscal policies. It suggests that these countries could improve their growth prospects by adopting more disciplined fiscal frameworks, flexible exchange-rate regimes, and open international capital movement policies. Additionally, building sovereign-wealth funds and emergency reserves could provide crucial support during economic downturns.

Fibre2Fashion News Desk (KD)