Overview
The latest World Economic Situation and Prospects report for 2024 paints a sobering picture of the global economic landscape. The world economy continues to face multiple crises, jeopardizing progress towards the Sustainable Development Goals (SDGs). Although global economic growth outperformed expectations in 2023 with several large economies showing remarkable resilience, simmering geopolitical tensions and the growing intensity and frequency of extreme weather events have increased underlying risks and vulnerabilities. Furthermore, tight financial conditions also pose increasing risks to global trade and industrial production.
Global GDP growth
The report forecasts a deceleration in global GDP growth, from an estimated 2.7% in 2023 to 2.4% in 2024, signaling a continuation of sluggish growth trends. Developing economies, in particular, are struggling to recover from pandemic-induced losses, with many facing high debt and investment shortfalls.
Regional disparities
The United States, the world’s largest economy, is expected to see a drop in GDP growth from 2.5% in 2023 to 1.4% in 2024. Consumer spending, a key driver of its economy, is likely to weaken due to various factors, including high interest rates and a softening labour market.
Meanwhile China, amid domestic and international headwinds, is projected to experience a moderate slowdown, with growth estimated at 4.7% in 2024, down from 5.3% in 2023. Europe and Japan also face significant economic headwinds, with growth rates forecasted at 1.2% for both regions in 2024.
Developing countries present a divergent picture, with Africa’s growth projected to slightly increase from 3.3% in 2023 to 3.5% in 2024. The report notes that the least developed countries (LDCs) are projected to grow by 5.0% in 2024, yet this falls short of the 7.0% growth target set in the Sustainable Development Goals (SDGs). High debt and limited fiscal space remain pressing concerns for these nations.
Regional statistics – GDP Growth
- United States: The US economy is expected to decelerate from 2.5% in 2023 to 1.4% in 2024 due to falling household savings, high interest rates, and a softening labor market.
- Europe: European Union GDP is projected to grow by 1.2% in 2024, driven by consumer spending, with risks posed by high inflation and interest rates.
- Commonwealth of Independent States (CIS): economic growth beat earlier projections, reflecting higher-than-expected growth in the Russian Federation, a moderate rebound in Ukraine after a deep contraction in 2022, and strong performance in the Caucasus and Central The aggregate GDP of the CIS and Georgia expanded by an estimated 3.3 per cent in 2023 and is projected to grow by 2.3 per cent in 2024.
- China: Chinese economic recovery was gradual, with growth reaching 5.3% in 2023, but expected to moderate to 4.7% in 2024.
- South Asia grew by an estimated 5.3 per cent in 2023 and is projected to increase by 5.2 per cent in 2024, driven by a robust expansion in India, which remains the fastest growing large economy in the world.
- India: Projected to grow by 6.2% in 2024, supported by domestic demand and growth in manufacturing and services.
- Africa: Growth is projected to increase from 3.3% in 2023 to 3.5% in 2024, with climate crisis and geopolitical instability impacting the region.
- East Asia: projected to experience a moderate slowdown, with growth declining from 4.9 per cent in 2023 to 4.6 per cent in 2024.
- Latin America and the Caribbean: GDP growth is expected to slow from 2.2% in 2023 to 1.6% in 2024 due to tighter financial conditions and reduced exports.
Labour market
The global labour market displays divergent trends between developed and developing countries post-pandemic. Developed countries experienced a robust recovery with low unemployment rates, notably 3.7% in the US and 6.0% in the EU in 2023, coupled with rising nominal wages and narrowing wage inequality. However, real income losses and labour shortages pose challenges.
In contrast, developing countries show mixed progress; while nations like China, Brazil, Türkiye, and Russia report declining unemployment, issues like informal employment, gender gaps, and high youth unemployment persist. Globally, the decline in female labor force participation to 47.2% in 2023 (compared to 48.1% in 2013) and the high NEET rate (not in employment, education or training) of 23.5% among youth highlight enduring challenges in gender equality and youth employment.
Since the introduction of ChatGPT in November 2022 there has been significant advancement in artificial intelligence. Within six months ChatGPT’s introduction, one-third of firms worldwide were using generative AI for at least one function, and about 40% planned to expand AI investment. The rapid adoption of AI is feared to exacerbate income inequalities. AI could reduce demand for low-skilled jobs, disproportionately impacting women and lower-income countries. In the US, women, who dominate clerical work, are at higher risk of job displacement by AI. Also, there’s a significant gender gap in AI professions.
Inflation
Global inflation, a key concern over the past two years, is showing signs of easing. Global headline inflation fell from 8.1% in 2022 to an estimated 5.7% in 2023 and is projected to decline to 3.9% in 2024.
However, food price inflation remains a critical issue, exacerbating food insecurity and poverty, particularly in developing countries. An estimated 238 million people experienced acute food insecurity in 2023, an increase of 21.6 million from the previous year.
Investment
The report also highlights the challenges in global investment trends, with a noted slowdown in investment growth across both developed and developing economies. However, while developed countries have continued to channel investments into sustainable and technology-driven sectors like green energy and digital infrastructure, developing countries face challenges such as capital flight and reduced foreign direct investment. Geopolitical tensions further influence these trends, affecting investment flows regionally.
Global investment growth is expected to remain low due to economic uncertainties, high debt burdens, and rising interest rates. Investment in the energy sector, especially in clean energy, is growing but not at a pace sufficient to meet the net-zero-emissions goal by 2050.
Trade
International trade is losing steam as a growth driver, with global trade growth weakening to 0.6% in 2023 and expected to recover to 2.4% in 2024. The report points to a shift in consumer spending from goods to services, rising geopolitical tensions, supply chain disruptions, and the lingering effects of the pandemic as factors impeding global trade.
Furthermore, the shift towards protectionist policies in some countries has also influenced trade dynamics, leading to a reevaluation of global supply chains and trade agreements. The repercussions of these changes are particularly pronounced in developing economies, which often rely heavily on exports for economic growth. In response, there has been a growing emphasis on diversifying trade partners and strengthening regional trade agreements to mitigate the risks associated with overreliance on a limited number of markets.
International Finance and Debt
Developing countries face high levels of external debt and rising interest rates, making access to international capital markets difficult. There’s a decline in official development assistance and foreign direct investment for low-income countries.
Debt sustainability has emerged as a critical challenge, especially for developing countries, in the wake of rising debt levels and changing global financial conditions. The increase in global interest rates, a consequence of monetary policy tightening by central banks like the Federal Reserve and the European Central Bank, has escalated debt servicing costs, particularly for countries with foreign currency-denominated debts. As a result, many countries are grappling with the need for debt restructuring, including renegotiating terms or seeking debt relief, to manage their escalating debt burdens more effectively.
Climate Change
2023 experienced extreme weather conditions, including the hottest summer on record since 1880 leading to devastating wildfires, floods, and droughts worldwide. These events have direct economic impacts, such as damage to infrastructure, agriculture, and livelihoods.
Studies have predicted substantial losses to the global economy due to climate change. For instance, some estimates suggest a potential reduction of about 10% in global GDP by 2100, considering events like the collapse of the Greenland ice shelf. Other models indicate that without mitigation of global warming, average global incomes could be 23% lower by 2100. The IPCC estimates that global GDP losses could range between 10 and 23 percent by 2100 due to temperature impacts alone.
Multilateralism and Sustainable Development
The 2024 WESP report calls for urgent action to address these diverse challenges. It emphasizes the need for strengthened global cooperation, particularly in areas like climate action, sustainable development financing, and addressing the debt sustainability challenges of low- and middle-income countries. The report underscores the critical role of multilateralism in navigating the complex global economic landscape and achieving the SDGs.
