2024 Global Economic Prospects Part 2: Slowing Growth Outlook

Jan 15, 2024 | Macro Insights, No Bull Economics

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Amid a barrage of shocks during the past 4 years, the global economy has proved to be surprisingly resilient according to the World Bank. Major economies are emerging mostly unscathed after the fastest rise in interest rates in 40 years without the usual scars of steep unemployment rates or financial crashes. Global inflation is being tamed without tipping the world into a recession. It is rare for countries to bring inflation rates down without triggering a downturn, but this time a “soft landing” seems increasingly possible. However, economic growth needs to be faster for the sake of the world’s poor…

Key Points

  • World Bank forecasts imply that both advanced & developing economies are set to grow more slowly in 2024 & 2025 than they did in the decade before covid. Global growth is expected to slow for a 3rd year in a row to +2.4% before ticking up to +2.7% in 2025. Notably, sub-standard growth rate expectations (compared to the +3.1% average of the 2010s) are particularly difficult on the poor in both developing & advanced economies.
  • Softening global economic activity is driven by tight monetary policies, restrictive financial conditions, and weak global trade growth. The recent conflict in the Middle East has heightened geopolitical risks & raised uncertainty in commodity markets as the world economy continues to cope with the lingering effects of covid, the Russian Federation’s invasion of Ukraine, and the rise in inflation and subsequent sharp tightening of global monetary conditions. Let’s not forget to add to this list the global economic pressures driven by China’s saber-rattling in Taiwan.
  • The World Bank further points out that global per-capita investment growth in 2023 & 2024 is expected to average just 3.7% which is barely half the average of the previous 2 decades. The World Bank points out that without corrective action to this trend, global growth will remain well below potential for the remainder of the 2020s. NoBull points out that underinvestment is the fruit of fear & uncertainty driven by government lockdowns & the world needs to learn from the massive suffering of this policy blunder.
  • The World Bank’s goal is to replicate nearly 200 windfall-producing investment booms since the 1950s in which per-capita investment growth accelerated to +4% or more & stayed there for 6+ years. Notably, the World Bank attributes these investment booms to: the consolidation of government finances; expansion of trade & financial flows; stronger fiscal & financial institutions; and a better investment climate for private enterprise. NoBull would add that this “secret sauce” is incomplete without promoting global peace & the universal condemnation of war-mongering from imperialistic countries of all stripes.
  • The World Bank also has advice for the two-thirds of developing economies that rely on commodity exports: keep fiscal spending stable to support growth prospects & avoid pegging fiscal spending to the debilitating boom-and-bust cycles of commodity prices; adopt flexible exchange-rate systems; and avoid restrictions on international movements of capital. These policy measures could help commodity exporters in developing economies increase per capita GDP growth by +1% every 4-5 years.

Real GDP by Country

Source: Global Economic Prospects — January 2024 (worldbank.org)

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