On January 9, 2024, the World Bank (WB) has released its ‘January, 2024 Global Economic Prospects‘ (GEP) report projecting a third consecutive year of slowdown for global Gross Domestic Product (GDP) growth with a decrease to 2.4% in 2024. It was 2.6% in 2023, 3% in 2022 and 6.2% in 2021.
- Notably, the growth in 2020-2024 period is weaker than the years around 2008-2009 global financial crisis, the late 1990s Asian financial crisis and downturns in the early 2000s.
- The report forecasts 2025 global growth slightly higher at 2.7%, but this was marked down from a June forecast of 3% due to anticipated slowdowns among advanced economies.
- GEP is WB’s biannual report.
Highlights: Global Scenario
i.Growth in advanced economies is projected to slow in 2024 to well below its 2010-19 average pace
- It will diminish to 1.2% in 2024 from 1.5% in 2023.
- In 2025, growth of advance economies forecasted at 1.6%.
ii.Output in Emerging Market and Developing Economies (EMDEs) will be lower than the pre-pandemic, however, aggregate growth is set to improve slightly in EMDEs with stronger credit ratings, remaining close to pre-pandemic average rates.
- It was reduced to 3.9% in 2024 from 4% in 2023.
- In 2025, growth of EMDEs forecasted at 4%.
iii.The real GDP of High Income Countries will be 1.3% in 2024 and 1.8% in 2025.
- It will be 4% for Middle Income Countries in 2024 and 2025.
- Low-income countries to experience weaker-than-expected growth at 5.5% in 2024, and 5.6% in 2025.
iv.By 2024, 25% of developing countries and 40% of low-income countries will be poorer than pre-pandemic levels.
v.The key reasons behind the continued decline in global growth are ongoing Middle East tensions and challenges from the past four years, including the COVID-19 pandemic, the Russian invasion of Ukraine, and the inflation-related tightening of global monetary conditions.
vi.Global recovery post-2020 is slow, making 2020-24 the slowest half-decade of GDP growth in 30 years or since the early 1990s, along with geopolitical strains and a global recession.
vii.The 2021-24 global trade recovery is also predicted to be the weakest expansion outside of global recessions in 50 years.
- It grew by a meagre 0.2% in 2023, while, in 2024 it projected to grow by 2.3%.
viii.The WB recommends speeding up the USD 2.4 trillion annual investment for clean energy transition to boost growth in EMDEs.
- Sustained investment accelerations of at least 4% per year increases per-capita income, manufacturing, services output, and enhances countries’ fiscal positions.
India to Grow at 6.4% in Financial Year (FY)25
The WB has kept India’s GDP growth forecast unchanged at 6.3% for FY 2023-24 and 6.4% for FY 2024-25 driven by robust investment and services.
- It will edge up to 6.5% in FY26.
- India is expected to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow.
Highlights: Indian Scenario
i.Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets
ii.Consumer spending may slow down as post-pandemic demand dimnishes, and rising food prices could limit spending, especially for low-income households. Government spending is expected to increase gradually as part of efforts to reduce current spending.
iii.Growth in South Asian Region (SAR) is expected to edge slightly lower to a still-robust 5.6% in 2024, before firming to 5.9% in 2025.
- Domestic demand, including public consumption and investment, will remain major drivers of economic growth.
Recent Related News:
i.The October 2023 edition of the South Asia Development Update (SADU), titled Toward Faster, Cleaner Growth, shows that South Asia is growing faster than any other developing country region in the world, but slower than its pre-pandemic pace.
ii.According to World Economic Outlook (WEO), October 2023 -Navigating Global Divergences‘ the InternationalMonetary Fund (IMF) has raised India’s Gross Domestic Product (GDP) growth forecast to 6.3% in 2023 from July 2023 estimate of 6.1% due to 7.8% growth during the June quarter.
About World Bank (WB):
President (WB Group)– Ajay Banga
Establishment– 1944
Headquarters– Washington D.C, United States (US)
Members– 189 member states
