The World Bank Warns of the Lowest Growth in 30 Years in 2024. Here Are the Reasons Why.
From 2.6% in 2023, global growth could slip to 2.4% in 2024.
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2.4%.
That's the figure that has dominated the news this week in the world of economics. Of course, the SEC's approval of Bitcoin Spot ETFs in America was a financial landmark, but here we're talking about economics or even macroeconomics.
The World Bank has published its growth forecast for 2024. The figure of 2.4% doesn't inspire much enthusiasm, as it's a slip from the 2.6% of 2023, but worse still, it would be the lowest growth rate in 30 years!
So how can we explain this major global slowdown?
How can we explain this low-growth world that the World Bank foresees for 2024 and the rest of the decade?
What's even more astonishing is that global growth is not plummeting, but is deteriorating a little more each year. This is the third year running that this has happened.
The reasons behind this deterioration in global growth are more structural than cyclical.
The World Bank speaks of a decade of wasted opportunities for the 20s, i.e. the years between 2020 and 2030.
The first reason is the slowdown in international trade. For the year 2024, the World Bank anticipates 50% of the average for the decade before the COVID-19 pandemic. This is quite simply a phenomenal drop in international trade.
The second reason is the meteoric rise in interest rates. These rising rates are beginning to weigh on the economies of both developed and emerging countries. Don't forget that it takes around 18 months for rate rises to start infusing the economy. At the start of 2024, we're there, and we'll be there for the rest of the year, even if central banks start cutting rates in June 2024.
The third reason is debt!
The indebtedness of governments around the world is colossal. Massive. Superlatives are in order here. State indebtedness was already high before the COVID-19 pandemic, but it skyrocketed with this pandemic from which the whole world thought it was safe.
This indebtedness limits governments' ability to react to new crises, implement new stimulus plans, or finance the ecological transition, at a time when the effects of global warming are becoming increasingly powerful around the world, making it clear that urgent action is needed.
To these three reasons put forward by the IMF, we can add demography. We are witnessing a collapse in the birth rate and an increase in life expectancy in the most developed countries, which doesn't help matters.
There are other reasons to consider too, such as the digital transition and artificial intelligence, or the ecological transition, which will weigh on growth as long as governments don't have the means to finance it.
Final Thoughts
In the future, we'll have to adapt to a world of slower growth, with all the economic consequences that this will entail. Of course, this is not the end of the world, but it is a world that will have to face new challenges as a result of this major slowdown.
