January 30, 2024/FBNQuest Research
The World Bank recently published its January ’24 edition of the Global Economic Prospects report. The report forecasts a continued slowdown in the growth of the global economy for the third consecutive year. As a result, the Bank has revised its growth projection downwards to 2.4% in 2024 from 2.6% in 2023. However, the Bank’s outlook for the global economy in 2025 is more positive, with a growth expectation of 2.7%. The Bank identified several challenges, including tight monetary policies aimed at tackling declining but still high global inflation rates, restrictive financial conditions, and weaker global trade and investment.
For the advanced economies, growth is expected to decelerate to 1.2% in 2024, down from 2.6% in 2023, due to declining domestic demand and softer consumption and investment growth.
More specifically, within the region, growth in the US is expected to slow significantly to 1.6% in 2024 (vs. 2.5% in 2023). The lower outlook reflects weakened domestic and business investment activity due to the impact of elevated interest rates on the economy.
- For the Euro area, the region’s growth forecast was revised upwards to 0.7% (from 0.4% in 2022) as reduced-price pressures are expected to increase real wages and disposable incomes. However, the Bank expects the effects of previous monetary tightening to feed through domestic demand, especially business investment.
Regarding emerging markets and developing economies (EMDEs), although most regions anticipate some improvements in economic growth, the overall outlook remains subdued. As such, the growth expectations remained unchanged at 3.9% in 2024.
The Bank sees downside risk posed by the recent geopolitical tension in the Middle East and the lingering Russia’s invasion of Ukraine, which could result in higher energy prices and negative implications on global trade and inflation.
Furthermore, other highlighted risks include financial stress from high interest rates, unabating inflation, sluggish recovery of China’s growth, and extreme climatic conditions.
Meanwhile, the Bank noted that global trade in goods and services experienced muted growth (0.2%) in 2023, marking its slowest expansion outside global recessions in the past 50 years, primarily due to a combination of a decline in global goods trade and a slowed services trade growth in the second half of the year.
However, global trade growth is expected to grow by 2.3% in 2024, partly due to a recovery in the demand for goods and improvement in advanced-economy trade.
According to the Bank, global inflation will decline significantly in 2023 due to lower energy and food price inflation. However, inflation remains above the Central Bank’s target, especially in most advanced economies.
Moving forward, global inflation will continue to decline in 2024, largely due to expected weakness in global demand and a slight reduction in commodity prices. Consequently, global inflation is projected to settle this year at 3.7% y/y, before falling further to 3.4% y/y in 2025.
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