January 10, Colombo (LNW): The World Bank’s Global Economic Prospects Report reveals that the global economy is on track to record its slowest half-decade of GDP growth in 30 years by the end of 2024.
While the risk of a global recession has diminished due to the strength of the U.S. economy, rising geopolitical tensions pose fresh near-term hazards.
Developing economies face challenges with slowing growth, sluggish global trade, and tight financial conditions.
Global trade growth in 2024 is expected to be half the pre-pandemic decade average.
Developing economies’ borrowing costs, especially those with poor credit ratings, are likely to remain high.
Global growth is projected to slow for the third consecutive year, with developing economies growing only 3.9 per cent. Low-income countries are expected to grow 5.5 per cent, below previous estimates.
Despite the challenges, opportunities exist to turn the tide with accelerated investment and strengthened fiscal policy frameworks.
To meet climate and development goals by 2030, developing countries need a significant increase in investment, approximately $2.4 trillion per year, requiring comprehensive policy packages.
Developing economies can achieve transformation through sustained investment booms, leading to faster convergence with advanced economies, poverty reduction, and quadrupled productivity growth.
However, the report emphasises the need for hard work, including improving fiscal and monetary frameworks, enhancing the investment climate, and strengthening institutions.
The findings also highlight the importance of avoiding boom-and-bust cycles, especially for commodity-exporting developing economies.
Governments in these countries often adopt fiscal policies that exacerbate economic cycles, contributing to increased volatility.
To address this, implementing fiscal frameworks to discipline government spending, adopting flexible exchange-rate regimes, and avoiding capital movement restrictions can help reduce volatility and enhance growth prospects for commodity exporters.
