WORLD ECONOMY SET FOR A BUMPY ROAD AHEAD 
Global economic growth is forecast to decelerate to 2.4% in 2024, marking the third consecutive year of slowdown, according to the World Bank.
This trend reflects the lingering impact of stringent monetary policies aimed at curbing historically high inflation, as well as restrictive credit conditions, and lacklustre global trade and investment. Major economies are experiencing subdued growth, while emerging markets have seen robust fundamentals as conditions improve. However, emerging markets with pronounced vulnerabilities face a precarious situation due to elevated debt and financing costs.
The recent Middle East conflict and Russia's invasion of Ukraine have heightened geopolitical risks. Escalation of conflicts could trigger a surge in energy prices, impacting global activity and inflation. Additional risks encompass financial stress from elevated real interest rates, persistent inflation, slower-than-expected growth in China, increased trade fragmentation, and climate change-induced disasters.
“Against this backdrop, policy makers face enormous challenges and difficult trade-offs,” according to the World Bank. International co-operation needs to be strengthened to provide debt relief, especially for the poorest countries. Governments must also tackle climate change, foster energy transition, facilitate trade flows, and alleviate food insecurity, the bank added.
Elevated public debt and borrowing costs constrain fiscal space, posing significant challenges for developing markets, particularly those with weak credit ratings, striving to enhance fiscal sustainability while meeting investment needs.
Commodity exporters grapple with the additional challenge of managing fluctuations in commodity prices, emphasising the need for robust policy frameworks. Structural reforms are crucial for boosting long-term growth, focusing on accelerating investment, improving productivity, and narrowing gender gaps in labour markets.
REGIONAL GROWTH
While some regions in emerging markets anticipate improvements in growth, the overall outlook remains restrained. Emerging markets will grow 3.9% in 2023, surpassing the advanced economies’ 1.2% acceleration.
South Asia will be the best performing regional market, up 5.6% in 2024 (compared to 5.7% in 2023), led by India.
Anticipated softening in growth is projected for East Asia and Pacific, primarily due to a deceleration in China's growth. East Asia and Pacific will growth at 4.5% in 2024 (compared to 5.1% in 2023).
Developing Europe and Central Asia will expand 2.4% this year , building on the 3.7% GDP increase in 2023. Latin America and the Caribbean will witness only a modest improvement in growth from a weak base last year to grow at 2.3% in 2024 (compared to 2.4% in 2023).
INFLATION EASING
Policymakers across the world will also keep a close eye on inflation, which eroded purchasing power of consumers and raised the corporate debt burden.
Their primary focus will be to achieve lasting reductions in inflation, managing escalating fiscal challenges, and fostering prospects for sustainable and inclusive medium-term growth.
“Policy rates appear to be at or close to their peak in most advanced economies, although some additional rate rises could still be needed if underlying inflationary pressures prove persistent,” according to the latest report by the Organisation for Economic Cooperation and Development (OECD). “The need to maintain downward pressure on inflation will limit scope for policy rate reductions until well into 2024, with nominal rates then being lowered in parallel with inflation.”
TRADE PROSPECTS BRIGHTEN
The World Trade Organization (WTO) expects global trade to post a 0.8% expansion in 2023, less than half the growth levels of 2022, as the global economy grappled with rising inflation and high interest rates since the fourth quarter of 2022, particularly in the European Union and the United States.
However growth would likely return in 2024 as inflation eases.
“The stronger growth predicted for 2024 is likely to be driven by increased trade in goods closely linked to the business cycle, such as machinery and consumer durables, which tend to recover when economic growth stabilises,” WTO noted.
Climate investments could also be a driver of investment, trade and business activity.
“2024 must be the year when we break out of this quagmire. By unlocking big, bold investments, we can drive sustainable development and climate action, and put the global economy on a stronger growth path for all,” said António Guterres, United Nations’ secretary-general. “We must build on the progress made in the past year towards an SDG Stimulus of at least USD 500 billion per year in affordable long-term financing for investments in sustainable development and climate action.
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