In 2024, the world economy will contract for the third year in a row due to factors such as rising interest rates, ongoing inflation, declining trade, and a declining China.
The World Bank painted this image on Tuesday when it predicted that global economic growth would be limited to 2.4% this year. This would represent a decline from growth rates of 2.6% in 2023, 3% in 2022, and an impressive 6.2% in 2021, which demonstrated the strong rebound from the pandemic recession of 2020.
Increased tensions around the world, especially in light of Israel’s war with Hamas and the situation in Ukraine, could lead to even slower growth. Additionally, World Bank representatives worry that highly indebted developing nations will not be able to finance the expenditures needed to combat poverty and climate change.
The chief economist of the World Bank, Indermit Gill, said in a statement that “near-term growth will remain weak, leaving many developing countries—especially the poorest—stuck in a trap: with paralyzing levels of debt and tenuous access to food for nearly one out of every three people.”
The global economy has shown itself to be remarkably resilient in the face of numerous shocks in recent years, including the pandemic, Russia’s invasion of Ukraine, a resurgence of global inflation, and high-interest rates imposed by central banks in an attempt to rein in price increases. According to the World Bank, the likelihood of a worldwide recession has decreased, and the world economy expanded by half a percentage point in 2023 compared to its June forecast.
The United States led the lead in 2023, with growth of 2.5% probably recorded last year, 1.4 percentage points higher than the World Bank had predicted in mid-year. The World Bank, an organization that fights poverty in 189 countries, projects that this year’s U.S. growth will slow to 1.6% as rising interest rates make borrowing and spending less viable.
Since March 2022, the Federal Reserve has increased US interest rates eleven times. Its tireless efforts have contributed to bringing U.S. inflation down to almost the Fed’s goal level of 2% from the four-decade high it hit in mid-2022.
Higher rates are also taming global inflation, which the World Bank foresees plunging from 5.3% last year to 3.7% in 2024 and 3.4% in 2025, but still above pre-pandemic levels.
China’s economy, which is the second largest in the world after the US, is predicted to grow by 4.3% in 2025 and 4.5% this year, a significant decline from 5.2% last year. China’s economy, which for many years was a major driver of global growth, has recently imploded due to an overbuilt real estate market. Customers are depressed, and youth unemployment is rife. Its population is aging as well, which limits its potential for expansion.
China’s slowing economy is expected to have negative effects on developing nations like Chile, which exports copper, and South Africa, which produces coal, which provides the Chinese market with commodities.
The 20 nations that make up the eurozone are predicted by the World Bank to grow by 0.7% this year, which is a slight improvement above the 0.4% growth seen last year. It is predicted that Japan’s GDP will expand by just 0.9% or half as fast as it did in 2023.
