Jan 9, 2024 - Economy

"A sorry record:" World Bank warns of miserable decade

Illustration of stormy raindrops falling onto an umbrella with the world map on it

Illustration: Rae Cook/Axios

The global economy of the 2020s will be more bleak — with sluggish economic activity, less trade growth and crushing borrowing costs — than the decade that preceded it.

Driving the news: This is the new warning from the World Bank Tuesday morning that says the global economy so far had its weakest performance in more than 30 years.

Why it matters: Economic prospects appear much brighter than a year ago as the global inflation shock recedes without tipping the world into a recession. But growth is slowing, with further threats from geopolitics and tightening credit conditions.

  • "As the world nears the midpoint of what was intended to be a transformative decade for development, the global economy is set to rack up a sorry record by the end of 2024," the World Bank says in its release.

Driving the news: Global growth will slow for the third consecutive year to 2.4%, down 0.2 percentage point from 2023, the "Global Economic Prospects" report projects.

  • That would be nearly three-quarters of a percentage point below the average growth rate in the 2010s — and the slowest half-decade of GDP growth in three decades.
  • For poorer countries, the outlook is more downbeat than officials expected, with developing economies expected to grow 3.9% this year — one percentage point below the average seen in the last decade.

The big picture: A resilient U.S. economy means the global economy is in a better place than expected a year ago. But the growth outlook is darkening, the World Bank says — with big implications for climate investment and poverty reduction.

What they're saying: "There is growth, but the problem is still there: we will have mediocre growth relative to last decade," World Bank deputy chief economist Ayhan Kose tells Axios in an interview.

  • "It's like you go to your doctor who tells you that you have a big problem. And then two weeks later, your doctor says 'I told you it's a big problem, but it's not that big,'" Kose says.

What to watch: The warning is the latest about the current decade that has so far been tumultuous, with a global pandemic, historic inflation shock, sharply higher interest rates and geopolitical conflict. It's unclear whether that chaos will break into a more normal backdrop.

  • "Domestic structural reforms have taken a backseat. There has not been nearly as much progress in the last four or five years as there was earlier," World Bank chief economist Indermit Gill says.
  • "The trade environment started to deteriorate. The overall macro environment deteriorated," Gill adds. "We need to reverse these things," he says, noting that one piece is already underway with slower inflation rates worldwide.

Yes, but: Some of the gloomiest of warnings about the economy last year have not played out — especially in the U.S.

  • In light of that, for the first time since the pandemic hit, the World Bank is considering upside risks — not just downside ones.
  • "There is a possibility the U.S. economy will remain resilient, while inflation is coming down," Kose says, adding that growth in the U.S. could be as much as 1 percentage point above its baseline.
  • "If that happens, we will see better growth in the global economy and better growth in emerging developing economies."
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