The Global Economy in Five Charts

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Global growth is expected to slow to 2.4 percent in 2024—the third consecutive year of deceleration—reflecting the lagged and ongoing effects of tight monetary policies to rein in decades-high inflation, restrictive credit conditions, and anemic global trade and investment.  Output in emerging market and developing economies (EMDEs) is set to follow a notably lower path than it did before the pandemic, with sluggish per capita growth, especially in fragile countries. The recent conflict in the Middle East has heightened geopolitical risks, and an escalation could weigh on global growth. This comes while the global economy is continuing to cope with the lingering effects of the overlapping shocks of the past four years—the COVID-19 pandemic, the Russian Federation’s invasion of Ukraine, and the rise in inflation and subsequent sharp tightening of global monetary conditions. Financial stress related to elevated real interest rates represents another source of risk to the global outlook.  

 

Near-term growth prospects are diverging

Growth in advanced economies as a whole and in China is projected to slow in 2024 to well below its 2010-19 average pace. In contrast, aggregate growth is set to improve slightly in EMDEs with stronger credit ratings, remaining close to pre-pandemic average rates.  Although overall growth is also expected to firm somewhat from its 2023 low in EMDEs with weaker credit ratings, the outlook for many of them remains precarious, given elevated debt and financing costs, as well as idiosyncratic headwinds such as conflict.  

Figure 1: Growth, by economy and EMDE credit rating

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Growth, by economy and EMDE credit rating
Sources: Moody’s Analytics; World Bank.
Footnote: e = estimate; f = forecast; EMDEs = emerging market and developing economies. Advanced-economy GDP aggregates are calculated using real U.S. dollar GDP weights at average 2010-19 prices and market exchange rates; EMDE GDP aggregates show the median. Credit ratings are Moody’s sovereign foreign currency ratings. “Stronger” is defined as credit ratings of B and above. “Weaker” is defined as ratings of Caa and below.

 

Global growth is set for the weakest half-decade performance in 30 years

The global recovery from the 2020 pandemic recession remains subdued, with 2020-24 expected to mark the weakest start to a decade for global growth since the early 1990s—another period characterized by geopolitical strains and a global recession. 

 

The recovery in global trade is feeble

Global trade growth was virtually stagnant in 2023, with goods trade contracting amid anemic global industrial production. Services trade continued to recover, but at a slower pace than previously expected. Overall, the recovery in global trade in 2021-24 is projected to be the weakest following a global recession in the past half-century. Geopolitical uncertainty, the possibility of a more protracted slowdown in China, and the prospect of further measures to restrict international trade pose downside risks to the trade outlook. 

Figure 3: Global trade around global recessions

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Global trade around global recessions
Source: World Bank.
Footnote: Figure shows global trade recovery after global recessions. Year “t” denotes the year of the global recessions: 1975, 1982, 1991, 2009, and 2020. Past global recessions show the range for the four global recessions prior to 2020.

 

Progress in closing the gap in EMDE per capita income with advanced economies is expected to be limited

EMDEs are set to make limited progress catching up to advanced-economy levels of per capita income.  Many vulnerable EMDEs are falling further behind—per capita income is forecast to remain below its 2019 level this year in one-third of low-income countries and more than 50 percent of economies facing fragile and conflict-affected situations.

 

Growth would be even weaker if a number of downside risks materialized

There are several downside risks to the outlook—including the prospects of higher oil prices due to an escalation in geopolitical tensions, financial stress in EMDEs that leads to surging sovereign spreads, and weaker growth in China resulting in adverse global spillovers via commodity and other channels. In each case, global growth in 2024 would be reduced by 0.2 percentage point below the baseline. In contrast, an upside scenario with higher-than-expected U.S. growth could boost global growth by 0.2 percentage point this year.

 

Authors

Vasiliki Papagianni

Research analyst, World Bank's Prospects Group

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