The global economy will record the slowest half-decade of GDP growth in 30 years by the end of 2024, the World Bank said in its latest Global Economic Prospects report.

While the global recession risk has receded largely because of the strength of the US economy, mounting geopolitical tensions could create fresh near-term hazards for the world economy, the report said.

Meanwhile, the medium-term outlook has “darkened” for many developing economies amid slowing growth in most major economies, sluggish global trade, and the tightest financial conditions in decades.

Global trade growth this year is expected to be only half the average in the decade before the pandemic. Meanwhile, borrowing costs for developing economies —especially those with poor credit ratings will likely remain steep, with global interest rates stuck at four-decade highs in inflation-adjusted terms.

Global growth is projected to slow for the third year in a row, from 2.6% last year to 2.4% in 2024, almost three-quarters of a percentage point below the average of the 2010s.

Developing economies are projected to grow just 3.9%, more than one percentage point below the previous decade's average.

After a disappointing performance last year, low-income countries should grow 5.5%, weaker than previously expected. Meanwhile, advanced economies growth is forecast to slow to 1.2% this year from 1.5% in 2023.  

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President.

Tackling climate change

To tackle climate change and achieve other key global development goals by 2030, developing countries will need to deliver a formidable increase in investment of about $2.4 trillion per year.

“Without a comprehensive policy package, prospects for such an increase are not bright,” the report said.

Per capita investment growth in developing economies between 2023 and 2024 is expected to average only 3.7%, just over half the rate of the previous two decades.

Advice for developing countries

The report states that governments in developing countries - commodity exporters specifically - often adopt fiscal policies that intensify booms and busts.

The drag can be reduced by implementing a fiscal framework that helps discipline government spending by adopting flexible exchange-rate regimes and avoiding restrictions on the movement of international capital.

On average, these policy measures could help commodity exporters in developing economies boost their per capita GDP growth by as much as one percentage point every four or five years.

Countries can also benefit by building sovereign-wealth funds and other rainy-day funds that can be deployed quickly in an emergency, the World Bank said.     

(Editing by Brinda Darasha; brinda.darasha@lseg.com)