World Bank: Global economy is ‘precarious’

The World Bank released its Global Economic Prospects for 2024 — and it’s not looking good.

For all the economic turmoil brought on by the pandemic, the World Bank expects new hazards to continue exacerbating economic uncertainty. Per the international development organization’s report, the global economy will likely continue to slow this year, on account of inflation, Russia’s invasion of Ukraine, and ongoing pandemic effects.

Global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023, according to the organization’s projections. It’ll make a “tepid recovery” to 2.4% in 2024, as long as banking sector stress and “inflation pressures” don’t spill over into emerging markets and developing economies (EMDEs).

“Many developing economies are struggling to cope with weak growth, persistently high inflation, and record debt levels. Yet new hazards—such as the possibility of more widespread spillovers from renewed financial stress in advanced economies—could make matters even worse for them,” Ayhan Kose, deputy chief economist of the World Bank, said in a statement.

The report analyzed how rising US interest rates have impacted EMDEs worldwide. The recent rise in two-year Treasury yields has been associated with “adverse financial effects” in those markets and economies, including an increased likelihood of financial crisis.

“The world economy is in a precarious position,” Indermit Gill, World Bank Group SVP and chief economist, said in the statement. “In emerging markets and developing economies, debt pressures are growing due to higher interest rates. Fiscal weaknesses have already tipped many low-income countries into debt distress.”

By 2024, the World Bank expects economic activity in EMDEs to remain about 5% below levels projected just before the pandemic. In more than a third of low-income countries, “per capita incomes in 2024 will still be below 2019 levels.”

While the bank’s half-yearly report presents a decidedly gloomy outlook, it’s still an improvement from its January forecast, which predicted worldwide growth of just 1.7% in 2023.