Global economy heading towards lowest half-decade growth in 30 years

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The global economy is set to hit a grim record by the end of 2024: the slowest half-decade of GDP growth in 30 years, according to the World Bank’s latest Global Economic Prospects report. 

Economic performance in the first half of the 2020s is on track to be even worse than the aftermath of the financial crisis and other downturns since the early 1990s, the report, published on Tuesday, suggests.

Despite global growth being projected to slow for the third year in a row (from 2.6% last year to 2.4% in 2024), the Washington-based organisation is confident the global economy is in a better place than it was a year ago. 

It believes the prospect of a global recession has receded, largely because of the strength of the US economy. However, it warns that rising geopolitical tensions, particularly as a result of Israel’s war with Hamas and the conflict in Ukraine, pose a risk of even weaker growth. 

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

“Near-term growth will remain weak, leaving many developing countries, especially the poorest, stuck in a trap: with paralysing levels of debt and tenuous access to food for nearly one out of every three people,” he added.

That would obstruct progress on many global priorities including climate change, he said. However, Gill believes there are still opportunities to turn the tide. 

Eurozone expected to grow slightly more in 2024

The World Bank predicts the 20-nation euro area will grow 0.7% this year, a modest improvement on last year’s 0.4% expansion. 

The international financial institution expects economic growth in the US – the country which led the way in 2023, with a 2.5% growth – to decelerate to 1.6% this year as higher interest rates weaken borrowing and spending.

China’s economy, the world’s second largest, is forecast to grow 4.5% this year and 4.3% in 2025, down sharply from 5.2% last year. 

The Chinese economy, for decades a leading engine of global growth, has sputtered in recent years. Its overbuilt property market has imploded, consumers are downcast,  youth unemployment is rampant and the population is ageing, sapping its capacity for growth.

Slumping growth in China is likely to hurt developing countries that supply the Chinese market with commodities. These include coal-producing South Africa and copper-exporting Chile.

Japan’s economy is expected to grow just 0.9%, half the pace of its 2023 expansion.