Investment could boost global growth in 2024

Global GDP could grow by 2.4% this year - the World Bank (WB) forecast in its latest Global Economic Prospects report, released on January 9.

This is lower than the forecast of 2.6% in 2023; 3% in 2022 and 6.2% in 2021 when the COVID-19 pandemic ends. However, the World Bank said, the risk of a global recession has been reduced thanks to the strength of the US economy after a surprising recovery in 2023.

Reuters quoted World Bank Deputy Chief Economist Ayhan Kose as telling reporters that growth in the 2020-2024 period will be lower than during the 2008-2009 global financial crisis, the Asian financial crisis in the late 1990s and the recession in the early 2000s.

Excluding the pandemic-related slowdown in 2020, this year's growth rate is set to be the weakest since the global financial crisis in 2009, the World Bank said. The World Bank forecasts global growth in 2025 to be slightly higher at 2.7%, but this is lower than its June forecast of 3%.

Without a major adjustment, “the 2020s will go down as a decade of wasted opportunity,” said World Bank chief economist Indermit Gill. Short-term growth will remain weak, leaving many developing countries – especially the poorest – trapped in a trap of crippling debt levels and nearly a third of the world’s population without access to adequate food.

The dim outlook for this year comes after global growth in 2023 was estimated to be 0.5% higher than forecast in June as the US economy outperformed on strong consumer spending. The US economy is expected to grow 2.5% in 2023, up from 1.4% in June. The World Bank forecasts US growth will slow to 1.6% this year as monetary policy tightens amid falling savings, but that is still double the June estimate.

The picture for the eurozone is significantly bleaker, with growth forecast at 0.7% this year after high energy prices led to just 0.4% growth in 2023. Tighter credit conditions have cut the region’s 2024 outlook by 0.6% from the World Bank’s June forecast.

China is also forecast to grow 4.5% in 2024 – its slowest growth in more than three decades outside the pandemic-hit years of 2020 and 2022. The forecast was cut 0.1% from June, reflecting weaker consumer spending amid continued uncertainty in the property sector, with growth slowing to 4.3% in 2025.

Emerging market and developing economies are forecast to grow 3.9% this year, down from 4.0% in 2023 and 1% below their average in the 2010s.

For Vietnam, the WB forecasts that after a year of stagnation, Vietnam's economic growth rate is expected to recover to 5.5% in 2024 and 6.0% in 2025. Domestic demand is expected to remain the main growth driver, although the growth rate remains low.

The way to boost growth, especially in emerging markets and developing countries, is to accelerate the $2.4 trillion in annual investments needed to transition to clean energy and adapt to climate change, the World Bank said.

The World Bank has studied rapid and sustained investment acceleration of at least 4% per year and found that it boosts per capita income growth, manufacturing and service output, and improves countries’ fiscal positions. However, achieving such acceleration generally requires comprehensive reforms, including structural reforms to expand cross-border trade and financial flows, as well as improved fiscal and monetary policy frameworks.

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