Predicted that the world economy will contract much more in 2024, with a number of reasons given, such as high interest rates, ongoing inflation, dwindling trade, and the economic crisis in China: World Bank

The World Bank has projected a further slowdown in the global economy for the third consecutive year in 2024, citing multiple challenges including high interest rates, persistent inflation, declining trade, and the economic downturn in China. The forecast indicates a growth rate of just 2.4% this year, down from 2.6% in 2023, 3% in 2022, and a robust 6.2% in 2021, reflecting the strong recovery from the pandemic-induced recession in 2020.

According to the World Bank, global tensions, exacerbated by conflicts such as Israel's war with Hamas and the situation in Ukraine, pose additional risks to economic growth. The organization expresses concern over highly indebted poor countries, highlighting their inability to make essential investments in climate change mitigation and poverty reduction.

Indermit Gill, the Chief Economist at the World Bank, emphasized the challenges faced by developing countries, stating, "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."

Despite recent shocks such as the pandemic, geopolitical conflicts, and inflationary pressures, the global economy has shown resilience. The World Bank notes that the global economy grew half a percentage point faster in 2023 than previously predicted, suggesting a reduced risk of a global recession.

In 2023, the United States led global growth with a likely 2.5% expansion, outperforming the World Bank's mid-year prediction by 1.4 percentage points. However, the World Bank anticipates a slowdown in U.S. growth to 1.6% in 2024 due to higher interest rates impacting borrowing and spending.

The Federal Reserve's efforts to address inflation by raising interest rates have contributed to a decline in U.S. inflation from its mid-2022 peak. The World Bank anticipates a moderation in global inflation from 5.3% in 2023 to 3.7% in 2024 and 3.4% in 2025, though still above pre-pandemic averages.

China's economy, a major global growth engine, is expected to grow by 4.5% in 2024, down from 5.2% in the previous year. Challenges like a collapsing property market, subdued consumer sentiment, and an aging population have contributed to China's economic slowdown, impacting countries that supply commodities to the Chinese market.

The Eurozone is forecasted to experience a modest growth of 0.7% in 2024, a slight improvement from 0.4% in the previous year. Meanwhile, Japan's economy is expected to grow at a slower pace of 0.9%, half the rate of its 2023 expansion.

The World Bank's projections underscore the complexities and uncertainties facing the global economy, emphasizing the need for coordinated efforts to address challenges and foster sustainable growth. The risks to the outlook remain tilted to the downside, even if adverse risks have moderated since October and some positive factors gained in relevance.

The global economy continues to recover from the pandemic, geopolitical conflicts, and inflationary pressures. Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled. Even so, growth remains slow and uneven, with widening divergences. The global economy is limping along, not sprinting.

The near-term economic outlook remains highly uncertain, however, as a myriad of economic, financial, geopolitical, and environmental risks persist. The world output growth forecast was revised down significantly from the May 2022 projection, with the world gross product growth projected to decelerate from an estimated 3.0% in 2022 to only 1.9% in 2023, marking one of the lowest growth rates in recent decades. Global growth is forecast to moderately pick up to 2.7% in 2024 should, as expected, some of the macroeconomic headwinds begin to subside next year.

In summary, the global economic outlook for 2024 is characterized by a projected slowdown in growth, influenced by a combination of factors including high interest rates, persistent inflation, declining trade, and specific challenges in major economies such as the United States, China, the Eurozone, and Japan. The World Bank's projections highlight the need for concerted efforts to address these challenges and foster sustainable growth in the global economy.