A flagship economic report highlights why global cooperation is important

A primary forecast released in New York on Thursday indicated stronger GDP growth than expected last year. COVID-19 The pandemic masked short-term risks and structural damage to the global economy.

The gloomy short-term outlook is based on continued high interest rates, further escalation of conflicts, sluggish international trade and increasing climate disasters, all of which pose significant challenges to global growth.

This points to a prolonged period of tight credit conditions and high borrowing costs, presenting a strong headwind to a debt-ridden global economy that requires more investment to revive growth, combat climate change and accelerate growth. Sustainable Development Goals (SDGs).

Escape from the grave: Guterres

“2024 should be the year we get out of this quagmire. By unlocking bigger, bolder investments, we can drive sustainable growth and climate action and put the global economy on a strong growth path for all.said UN chief Antonio Guterres.

„We need to build on the progress made in the past year towards an SDG boost of at least $500 billion per year in affordable long-term financing for investments in sustainable development and climate action.”

So how do the numbers break down? Let's begin our analysis with the scourge of prices that continues to threaten economies large and small:

inflammation

Global inflation is projected to ease from 5.7 percent in 2023 to 3.9 percent in 2024. But price pressures remain high in many countries, and the escalation of geopolitical conflict will only add to it.

A quarter of developing countries are projected to have annual inflation above 10 percent by 2024.

Since January 2021, consumer prices in developing economies have increased by a cumulative 21.1 percent, significantly eroding economic gains following the Covid-19 recovery.

„Persistently high inflation has further set back progress in poverty reduction, with particularly severe impacts on least developed countries„said Li Junhua, head of the UN Department of Economic and Social Affairs (DESA).

“This Strengthening global cooperation is absolutely necessary and multilateral trading system, reform development finance, addressing debt challenges and scaling up climate finance to help accelerate vulnerable countries towards a path of sustainable and inclusive growth.”

Regional differences

The United States, the world's largest economy, is expected to slow its GDP growth to 1.4 percent in 2024 from 2.5 percent in 2023. Consumer spending, a key driver of its economy, is likely to weaken due to various factors. Including higher interest rates and a softening labor market, the report said.

Meanwhile, China, facing domestic and international interventions, is forecast to experience a moderate slowdown with growth of 4.7 percent in 2024, down from 5.3 last year.

Europe and Japan face challenges as growth rates of 1.2 percent are projected for both regions in 2024.

Africa's growth rate is projected to increase slightly from 3.3 percent in 2023 to 3.5 percent in 2024.

Least developed countries (LDCs) are projected to grow by 5 percent by 2024, although this is below the 7 percent growth target under the SDGs, the report notes.

Labor markets

The global labor market presents a mixed post-pandemic picture. Developed countries have experienced a strong recovery with low unemployment rates, notably 3.7 percent in the United States and 6 percent in the EU in 2023, combined with nominal wages and narrow wage inequality.

However, real income losses and labor shortages pose challenges.

Developing countries show mixed progress; Countries such as China, Brazil, Turkey and Russia report declining unemployment, while gender gaps and high youth unemployment persist.

Globally, women's labor force participation will drop to 47.2 percent in 2023 (from 48.1 in 2013) and the NEET rate (not in employment, education or training) of 23.5 percent highlights persistent challenges among young people.

Global investment

There is a significant slowdown in investment growth in both developed and developing economies.

While developed countries continue to bring investments in sustainable and technology-driven sectors such as green energy and digital infrastructure, developing countries face challenges such as capital flight and declining foreign direct investment.

Global investment growth is expected to remain subdued due to economic uncertainties, high debt burdens and rising interest rates.

Investment in the energy sector, particularly in clean energy, is growing, but not fast enough to meet the net-zero emissions target by 2050.

International trade

International trade is losing steam as a driver of growth, with global trade growth slowing to 0.6 percent in 2023 and recovering to 2.4 percent in 2024.

A shift in consumer spending from goods to services, rising geopolitical tensions, supply chain disruptions and the lingering effects of pandemics are factors holding back trade growth, the report points out.

Moreover, the shift towards protectionist policies in some countries has also affected trade dynamics, leading to a re-evaluation of global supply chains and trade agreements.

International Finance and Credit

Developing countries face high levels of external debt and rising interest rates, making it difficult to access international capital markets. There has been a decline in official development assistance and foreign direct investment to low-income countries.

In the wake of rising debt levels and changing global financial conditions, debt sustainability has emerged as a critical challenge, particularly for developing countries.

A rise in global interest rates and monetary policy tightening by central banks such as the Federal Reserve and the European Central Bank have resulted in increased debt service costs, particularly for countries with foreign currency debt.

As a result, many countries struggle with the need for debt restructuring.

Climate change

2023 Extreme weather conditions worsen, leading to devastating wildfires, floods and droughts worldwide, including the hottest summer on record since 1880.

These events have direct economic impacts such as damage to infrastructure, agriculture and livelihoods.

Studies have predicted significant losses to the global economy due to climate change. For example, some estimates suggest that global GDP could decline by about 10 percent by 2100, considering events such as the collapse of the Greenland ice sheet.

Other models indicate that without mitigation of global warming, average world income will be 23% lower by 2100.

Multilaterality: The blue print for action

The 2024 WESP report calls for urgent action to address these diverse challenges. It emphasizes the need for strengthened global cooperation, particularly in areas such as climate action, sustainable development financing and addressing the debt sustainability challenges of low- and middle-income countries. Enhanced global cooperation is essential.