While the end of 2024 marks the halfway point of what was envisioned as a transformative decade for development, the World Bank acknowledged this week the looming risk of it turning into a “wretched milestone” – the weakest global growth performance of any half-decade since the 1990s.
Although the likelihood of a global recession has diminished, the majority of advanced and developing economies are poised for slower growth in 2024 and 2025 compared to the decade preceding the COVID-19 pandemic, according to the bank’s latest Global Economic Prospects report.
Namely, global growth is expected to slow to 2.4 per cent in 2024 – the third consecutive year of deceleration – reflecting the lagged and ongoing effects of tight monetary policies to rein in decades-high inflation, restrictive credit conditions, and anaemic global trade and investment.
Global growth stood at 2.6 per cent in 2023 and is expected to tick-up slightly to 2.7 per cent in 2025 – this, however, is still far below the 3.1 per cent of the 2010s.
“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s chief economist and senior vice-president.
The bank’s growth forecasts show developing economies growing at 3.9 per cent, low-income countries at 5.5 per cent, with a substantial portion of developing and low-income nations expected to remain poorer than pre-COVID-19 levels by the end of 2024. Meanwhile, advanced economies are set to see a growth slowdown from 1.5 per cent in 2023 to 1.2 per cent this year.
“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. That would obstruct progress on many global priorities,” Mr Gill said.
Weighing in on the findings of the report, Treasurer Jim Chalmers noted that Australia is not immune to a number of factors affecting the global economy, including conflicts in Europe and the Middle East, the slowdown in China, and the impact of higher interest rates around the world.
However, he said, Australia is entering this period of global uncertainty “from a position of relative economic strength”.
“We do have faster jobs growth than any of the major advanced economies, we’ve created more than 700,000 jobs through the life of our government. We’ve had two consecutive quarters of wages growth [and] inflation is moderating but not as fast as we would like,” the Treasurer told RN Breakfast.
“We’ve delivered the first budget surplus in 15 years and there’s a second one in prospect. All of these things put us in a better stead to confront this global economic uncertainty, which has been outlined so starkly in the World Bank report.”
Moreover, the Treasurer added that: “Our job in Australia is to make this not a lost decade, but a defining decade, to modernise our economy and maximise our advantages.”
Looking ahead at Labor’s next budget, he said the government will deploy “a textbook combination of cost-of-living relief to help people through difficult times, investing in a stronger economy in areas like skills and housing, the energy transformation technology, the care economy and human capital”.
“We’re under no illusion about the global difficulties, but also the pressures that people are under here in Australia. And that’s what motivates our agenda.”
World Bank offers hope
Despite portraying a bleak outlook for the global economy, the World Bank did provide a glimmer of hope, highlighting that since the 1950s, countries worldwide have successfully generated almost 200 windfall-producing investment booms – periods during which per-capita investment growth accelerated to 4 per cent or more and sustained that rate for over six years.
The secret sauce for sparking such episodes, the bank said, was a comprehensive policy package: consolidation of government finances, expansion of trade and financial flows, stronger fiscal and financial institutions, and a better investment climate for private enterprise.
Ultimately, the World Bank’s Mr Gill said that while the 2020s have so far “been a period of broken promises”, with governments falling short of the “unprecedented” goals they promised to meet by 2030, “2030 is still more than a half-decade away”.
“That is long enough for emerging markets and developing economies to regain some of the lost ground – if their governments act now,” he concluded.
