Will the global economy slow (again) in 2024? Alyssa Pointer/Bloomberg via Getty Images
The global economy will slow for the third year in a row in 2024 due to high interest rates, persistent inflation, declining trade and a slowing China.
That's the picture painted by the World Bank, which forecast on Tuesday that the global economy will expand by just 2.4% this year. This is up from 2.6% growth in 2023, 3% in 2022 and 6.2% in 2021, reflecting a strong recovery from the pandemic recession of 2020.
Global tensions, particularly those arising from Israel's war with Hamas and the conflict in Ukraine, pose the risk of even weaker growth. Also, World Bank officials are concerned that poor countries are too indebted to make the investments needed to fight climate change and poverty.
„Near-term growth will remain weak, trapping many developing countries — especially the poorest — in a trap: crippling debt levels and food shortages for nearly one in three people,” World Bank chief economist Intermid Gill said in a statement.
In recent years, the international economy has proven surprisingly resilient in the face of shock after shock: the pandemic, Russia's invasion of Ukraine, resurgent global inflation and burdensome interest rates imposed by central banks to bring inflation back under control. . The World Bank now says the global economy will grow half a percent faster in 2023 than it forecast in June and concludes that „the risk of a global recession has receded.”
Leading the way in 2023 is the US, which may have posted growth of 2.5% last year – 1.4 percentage points faster than the World Bank expected at mid-year. The World Bank, the 189-nation anti-poverty agency, expects US growth to slow to 1.6% this year as high interest rates weaken borrowing and spending.
The Federal Reserve has raised US interest rates 11 times since March 2022. Its aggressive efforts have helped bring U.S. inflation back from a four-decade high reached by mid-2022 to nearly the Fed's 2% target.
The higher rates are curbing global inflation, which the World Bank predicts will slow from 5.3% last year to 3.7% in 2024 and 3.4% in 2025, though still above the pre-pandemic average.
China's economy, the world's second largest after the US, is expected to grow by 4.5% this year and 4.3% in 2025, up from 5.2% last year. China's economy, a leading engine of global growth for decades, has seen the property market built on top of it explode in recent years. Its consumerism has declined with youth unemployment. Its population is aging, reducing its potential for growth.
China's declining growth will hurt developing countries that supply the Chinese market, such as coal-producing South Africa and copper-exporting Chile.
The World Bank expects the 20 countries that share the euro currency to grow by 0.7% this year, a slight improvement on last year's 0.4% expansion. Japan's economy is forecast to grow by just 0.9%, half the pace of its 2023 expansion.