The World Bank predicts 2024 will see the slowest growth in gross domestic product (GDP) in 30 years. Global economic progress has been slowing for a while. By one measure, the global economy is in a better place than it was a year ago: the risk of a global recession has receded, primarily because of the strength of the United States economy. But mounting geopolitical tensions could create fresh near-term hazards for the world economy.
Meanwhile, the medium-term financial outlook has darkened for many developing countries amid slowing growth in most major nations, sluggish global trade, and the tightest financial conditions in decades. Experts predict that the global trade growth in 2024 will be only half the average in the decade before the pandemic.
Borrowing costs for developing economies—especially those with poor credit ratings—are likely to remain steep, with global interest rates stuck at four-decade highs in inflation-adjusted terms.
Global Economic Insights
In October last year, the International Monetary Fund (IMF) forecast a 2.9% growth in 2024, well below the historical average of 3.8%. They project that the economies of developed countries would also show a decline in growth — however modest — to 4% compared to the previous year's 4.1%. Thankfully, inflation should continue to decline this year.
That said, according to Indermit Gill, the World Bank Group's Chief Economist and Senior Vice President, “Without a major course correction, the 2020s will go down as a decade of wasted opportunity. 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. That would obstruct progress on many global priorities.”
“Transformation can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks,” he added. To tackle climate change and achieve other key global development goals by 2030, developing countries will need to deliver a formidable increase in investment —about $2.4 trillion per year. Without a comprehensive policy package, prospects for such an increase are not bright. Per capita, investment growth in developing economies between 2023 and 2024 is expected to average only 3.7%, just over half the rate of the previous two decades.
Need for Reinvention, Heavier Investment, and Geopolitical Risk Management
Last year, a PwC report spoke about how 40% of global CEOs questioned how viable their companies would be in the span of 10 years. On 15 January this year, they released a survey concluding that business managers across industries must prepare themselves for changes and innovation that could transform their businesses or ruin them entirely in the next decade.
But innovation, including the advent of artificial intelligence and otherwise, could be the least of one's worries in the current climate, at least according to the World Economic Forum's 2024 Global Risks Report.
2023 was quite eventful, politically, economically, and otherwise. Several vulnerable communities — including Gaza, Israel, and Sudan — battled violent conflicts, droughts, wildfires, unbearable heat conditions, flooding, etc. Riots and strikes characterized most of the year. Economically speaking, the consequences of these events could have massive long-term impacts.
For example, last year, India had to ban the export of non-basmati rice after immense flooding drowned a lot of its crops. India's move had a massive impact on the global food scene. The Russia-Ukraine war and the aforementioned events could result in global shocks that can destabilize entire economies.
In 2024, the situation looks grim again, with many of the respondents of the WEF survey casting a negative outlook on the immediate future. 54% of the total respondents of the survey showed at least some anticipation for moderate instability in the next two years, while 30% expected more turbulence in the form of global catastrophes. The results worsened when researchers asked respondents about their predictions for the next decade.
Currently, four significant elements should shape the world's sociopolitical and economic scene in the long term. These include the development of climate change, technological innovation across multiple sectors, including but not limited to artificial intelligence, shifts in the size and structure of the world's populace, and geostrategic changes. Global conditions are constantly shifting when it comes to these domains. The changes could be cause for extreme volatility across the board.
Communities across the planet are starting to prepare to respond to local dilemmas like war, drought, etc. Unfortunately, this can severely impact how they deal with global issues and their economic standing. In such a situation, governments must come together and implement localized solutions requiring cross-border communication and coordination. Aside from government intervention, the private and public sectors also need to unite at this critical moment to reduce the damage caused by local and global crises.