Global Growth Grinds to a Halt as World Bank Predicts Third Year of Slowdown

The global economy is expected to slow down in 2024 for the third year as a result of factors like growing interest rates, persistent inflation, dwindling trade, and a faltering China.

The World Bank estimated that this year's global economic growth would be restricted to 2.4%. The growth rates of 2.6% in 2023, 3% in 2022, and 6.2% in 2021, which showed a fast recovery from the pandemic recession of 2020, would decline from this.

World Bank executives worry that developing countries with huge debts won't be able to afford the costs associated with fighting poverty and climate change. Even slower progress might result from increased tensions across the world, particularly in light of Israel's conflict with Hamas and the situation in Ukraine.

Short-term growth will always be modest, according to Indermit Gill, Chief Economist of the World Bank, which puts many emerging countries-especially the poor ones-in difficult situations. Gill clarified the challenges of these countries, which impact roughly one-third of the world's population and are characterized by high levels of debt and erratic food supply.

The recent worldwide pandemic, Russia's invasion of Ukraine, a comeback of global inflation, and high interest rates imposed by central banks to control price increases have all demonstrated the world economy's remarkable resilience in the face of adversity. The World Bank estimates that compared to its June prediction, the likelihood of a global recession has diminished and that the global economy would grow by half a percentage point in 2023.

With growth of 2.5% likely attained last year, 1.4 percentage points higher than the World Bank had forecast in mid-year, the United States led the way in 2023. The World Bank, an institution that works to combat poverty in 189 countries, predicts that the United States will expand by 1.6% this year, with borrowing and spending becoming less feasible due to rising interest rates.

The US Federal Reserve has raised interest rates eleven times since March 2022. Its unceasing efforts have helped to lower U.S. inflation from the four-decade peak it reached in mid-2022 to nearly the Fed's target level of 2%.

Inflation Projections, China's Slowdown, and Regional Impact

Due to increased interest rates, the World Bank projects that global inflation would drop from 5.3% last year to 3.7% in 2024 and 3.4% in 2025, however it will still be greater than levels seen before to the epidemic.

The second-biggest economy in the world, China's is expected to grow by 4.3% in 2025 and 4.5% this year, a sharp decrease from 5.2% last year. Due to an oversupplied real estate market, China's economy, which for a long time was a primary force behind world expansion, recently collapsed. Consumers are despondent, and young joblessness is rampant. Its capacity for growth is constrained by the aging of its people.

China's slowing economy is expected to have negative effects on emerging 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 expand by 0.7% this year, which is a little increase 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.