The 2020s should be the decade of great challenges: end poverty and hunger, reduce internal and external inequalities, eradicate the most serious diseases or drastically reduce pollutant emissions. But the world is reaching the halfway point of this decade and the World Bank's assessment is devastating. “Without a major course correction, the 2020s will go down in history as a decade of missed opportunities,” said the Washington-based organization’s chief economist, Indermit Gill. For the third year in a row, the company forecasts a slowdown in the economy, which will grow by 2.4%, two tenths less than in 2023. According to the World Economic Outlook, this data means that the planet is on the verge of “an unfortunate collapse suffer”. Record.” End of 2024: the five years with the lowest gross domestic product (GDP) growth in the last three decades.”
The soft landing of large economies has become the central scenario for those responsible for forecasts. The Federal Reserve and European Central Bank hope to have cooled their economies without plunging them into recession. Investors are also opting for this scenario and are starting to transfer the euphoria to the stock markets, which have been rallying again since November, with the prospect that rapid disinflation will also force central bankers to cut interest rates further. Sooner rather than later. The World Bank's forecasts do not reflect this optimism. Nowhere near. However, they believe there will be no bloodshed as the economy has proven “surprisingly resilient.” “Global inflation will be tamed without plunging the world into recession,” the document says.
However, the fight against inflation comes at a price. Central banks drain liquidity from markets and increase the price of money. This means increasingly cheaper loans. And many of the consequences may not yet be apparent. This will already weigh on the economy from the start, especially in regions such as the Eurozone, which is the economic bloc for which the World Bank forecasts a greater cut. According to the document, single currency countries will grow by 0.7% in 2024 and by 1.6% in 2025. In the sum of the two years, a total of 1.3 percentage points remain after a mediocre 2023, in which the 20 euro partner only rose by 0.4%.
Overall, the global economy will grow by 2.4%. The figure is very modest considering that this decade's growth rates are below the last decade's average of 3.1%. Although world leaders have tried to conspire to preserve investment, it will still be half of what it has been in the last 20 years, despite all the spending needed to meet climate goals. At the last annual meetings of the World Bank and the IMF in Marrakesh, the institutions already warned that the need to invest in technology to combat climate change would increase public debt by 50 percentage points in 2050 and make the finances of the poorest countries unsustainable would. .
The report stops precisely at these states, as they have been most affected by the successive crises that the planet has faced since the beginning of the decade. The outbreak of the pandemic, which they faced with greater difficulties than other economies, was followed by an energy crisis and, above all, a food crisis, the likes of which they had not experienced in decades. And as a result, they have once again encountered high levels of debt. According to the World Bank, the population of 40% of low-income countries will remain poorer at the end of 2024 than before the pandemic began.
World Bank Mission
“Near-term growth will remain weak, leaving many developing countries, particularly the poorest, trapped with crippling debt levels and precarious access to food for almost one in three. This will hinder progress on many global priorities,” says Gill, pointing to the fact that this situation could derail plans to rid the world of pollutant emissions by 2050. More specifically, the meetings in Marrakesh decided to entrust the World Bank and the rest of multilateral lenders, including the European Investment Bank, with the mission to combat climate change, end poverty and pursue shared prosperity.
The risks, the document warns, are manifold: global growth could be even lower if there were another outbreak of inflation, the financial markets would experience new stress episodes like that of the Silicon Valley Bank, or China's growth would be weaker than expected. And if, on top of that, trade tensions between major blocs continue to escalate and these continue to decline. But the increasing geopolitical crises are also worrying the World Bank. “The recent conflict in the Middle East, together with the Russian Federation's invasion of Ukraine, has increased geopolitical risks,” the document said, raising concerns that an increase in hostilities in the region would send commodity prices soaring and the It will be difficult to affect global trade – as is already the case with the major shipping companies – which would mean an increase in prices.
There is also great hope: it is called the United States. The World Bank is improving its forecast for this year by eight tenths – to 1.6% – for a market resistant to interest rate hikes thanks to strong employment and government programs promoted by Joe Biden. And it doesn't rule out that it could do better than expected given the dynamics of this economy. “Under these conditions, sustained employment gains will help support household incomes, while increased labor supply along with improved productivity will help contain businesses' labor costs,” he notes. in the report, which also points out that this would have an impact on developed and emerging markets.
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