The World Bank says the world economy has had its worst half-decade of growth in 30 years

A job fair in southwest China’s Chongqing city on April 11, 2023.

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According to the World Bank, the global economy is on track for its worst half-decade of growth in 30 years.

Global growth is expected to slow for a third straight year in 2024, falling to 2.4% from 2.6% in 2023, the organization said in its latest “Global Economic Outlook” report released on Tuesday.

Growth is expected to pick up slightly to 2.7% in 2025, although the acceleration over the five-year period will remain nearly three-quarters of a percentage point below the 2010 average.

And while the global economy has proved resilient to recessionary risks in 2023, heightened geopolitical tensions will pose new near-term challenges, the organization said, with most economies growing more slowly in 2024 and 2025 than in the previous decade. .

“You have a war in Eastern Europe, a Russian invasion of Ukraine. You have a serious conflict in the Middle East. Escalation of these conflicts could have significant impacts on energy prices, which could have impacts on inflation and economic growth,” he added. Ayhan Kose, deputy chief economist at the World Bank and director of the Prospects Group, told CNBC’s Silvia Amaro.

The bank warned that without a “major course correction”, the 2020s will be “a decade of missed opportunities”.

Developing economies will be hit the hardest

On a regional basis, growth is expected to weaken the most this year in North America, Europe and Central Asia, and Asia Pacific – mainly due to slower growth in China. A slight improvement is expected for Latin America and the Caribbean, coming from a low base, while a more pronounced increase is expected in the Middle East and Africa.

Still, developing economies will be the worst hit in the medium term, as sluggish global trade and tight financial conditions weigh heavily on growth.

“Short-term growth will remain weak, leaving many developing countries – especially the poorest – trapped: with crippling levels of debt and poor access to food for almost one in three people,” Gill said.

Developing economies are expected to grow by just 3.9% in 2024, more than one percentage point below the previous decade’s average. By the end of the year, people in around one in four developing countries and around 40% of low-income countries will still be poorer than they were on the eve of the Covid-19 pandemic in 2019, the organization said.

The bank said the data showed the world was falling short of its goal of making 2020 a “transformative decade” in the fight against extreme poverty, serious communicable diseases and climate change. But she added that there is an opportunity to turn the tide if governments act quickly to boost investment and strengthen fiscal policy frameworks.

“Investment booms have the potential to transform developing economies and help them accelerate their energy transition and achieve a wide range of development goals,” Kose said in a report released next week ahead of the World Economic Forum, where international business and political leaders gather for an annual meeting to they discussed global politics, economics and social issues.

“To generate such a boom, developing economies must implement comprehensive policy packages to improve fiscal and monetary frameworks, expand cross-border trade and financial flows, improve the investment climate and strengthen the quality of institutions,” he continued.

“It’s a tough job, but many developing economies have done it before. Doing it again will help mitigate the projected slowdown in potential growth for the rest of this decade.”

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