The global economy is at risk of a “wasted” decade and the weakest stretch of growth in 30 years, the World Bank warned on Tuesday, saying a sluggish recovery from the pandemic and crippling wars in Ukraine and the Middle East are expected to weigh heavily on output.
In its semiannual Global Economic Prospects report, the World Bank projected that the growth in world output will slow further in 2024, declining to 2.4 percent from 2.6 percent. Although the global economy has been surprisingly resilient, the report warned that its forecasts were subject to heightened uncertainty because of the two wars, a diminished Chinese economy and the increasing risks of natural disasters caused by global warming.
The converging crises in recent years have put the world economy on track for the weakest half-decade in 30 years.
“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s chief economist.
Global growth is projected to slow for the third straight year in 2024. Developing countries are bearing the brunt of the slowdown, with high borrowing costs and anemic trade volumes weighing on their economies.
Although policymakers have made progress in bringing inflation down from its 2022 high, the war in Gaza between Israel and Hamas is threatening to become a broader conflict that could spur a new bout of price increases by causing the cost of oil and food to spike.
“The recent conflict in the Middle East, coming on top of the Russian Federation’s invasion of Ukraine, has heightened geopolitical risks,” the report said. “Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation.”
Signs of fragility in the Chinese economy also remain a worry. World Bank economists pointed to lingering weakness in China’s property sector and lackluster consumer spending as evidence that the world’s second-largest economy will continue to underperform this year. They suggested that could pose headwinds for some of China’s trading partners in Asia.
Chinese growth is expected to slow to 4.5 percent this year from 5.2 percent in 2023. Outside the pandemic-induced downturn, that would be China’s slowest expansion in 30 years.
Europe and the United States are also poised for another year of weak output in 2024.
The World Bank projects that economic growth in the euro area will rise to 0.7 percent in 2024 from 0.4 percent in 2023. Despite easing inflation and rising wages, tight credit conditions are expected to constrain economic activity.
Growth in the United States is expected to slow to 1.6 percent this year from 2.5 percent in 2023. The World Bank attributes the slowdown to elevated interest rates — which are at their highest level in 22 years — and a pullback in government spending. Businesses are expected to be cautious about investing because of economic and political uncertainty, including around the 2024 election.
Despite such slow growth, Biden administration officials say they deserve credit for corralling inflation while keeping the economy afloat.
“I think we’ve made tremendous progress,” Treasury Secretary Janet L. Yellen told reporters on Monday. “It’s very unusual to have a period in which inflation declines as much it has while the labor market remains strong.”
She added: “But that’s what we’re seeing, and that’s why I say we’re enjoying a soft landing.”