The United Nations World Economic Situation and Prospects (WESP) 2024 report, unveiled on Thursday, anticipates a deceleration in global economic growth. The projected growth rate is expected to drop from an estimated 2.7 percent in 2023 to 2.4 percent in 2024, falling below the pre-pandemic rate of 3 percent.
While the global economy surpassed expectations in 2023, the report underscores that last year's robust GDP growth obscured immediate risks and underlying vulnerabilities.
The UN report paints a cautious picture for the near future. Challenges such as persistent high interest rates, escalating conflicts, sluggish international trade, and rising climate-related disasters are poised to impede global growth.
Moreover, the prospect of prolonged tight credit conditions and increased borrowing costs presents substantial obstacles for a world economy burdened by debt and in need of greater investments to revive growth, combat climate change, and accelerate progress toward Sustainable Development Goals (SDGs).
UN Secretary-General Antonio Guterres emphasized the need for substantial investments in 2024 to drive sustainable development and climate action, aiming to bolster global economic growth. He stressed the importance of building on the progress made in the past year, advocating for an SDG Stimulus of at least $500 billion annually in affordable long-term financing for sustainable development and climate action.
The report anticipates a slowdown in the growth of several major developed economies, especially the US, in 2024 due to factors such as high interest rates, reduced consumer spending, and weakened labor markets.
Likewise, the short-term growth outlook for many developing countries, notably in East Asia, Western Asia, Latin America, and the Caribbean, is deteriorating due to tighter financial conditions, limited fiscal capacity, and sluggish external demand.
Low-income and vulnerable economies face escalating balance-of-payments pressures and concerns about debt sustainability. Small island developing states, in particular, are constrained by heavy debt, high interest rates, and increased climate-related vulnerabilities, potentially reversing gains made on the SDGs.
The report forecasts a further decline in global inflation from 5.7 percent in 2023 to 3.9 percent in 2024. However, inflationary pressures persist in numerous countries, with potential risks of renewed escalation due to geopolitical conflicts.
Impact of High Inflation
The impact of persistently high inflation has been severe, especially in the least developed countries, hindering progress in poverty eradication since the Covid-19 recovery. Food price inflation remains a concern, disproportionately affecting the most vulnerable households amid supply disruptions, conflicts, and extreme weather events.
Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs, stressed the urgent need for strengthened global cooperation, multilateral trade reform, addressing debt challenges, and scaling up climate financing to bolster vulnerable countries' pursuit of sustainable and inclusive growth.
The report also highlights the uneven recovery in global labor markets post-pandemic. While developed economies have shown resilience, many developing nations, especially in Western Asia and Africa, are yet to regain pre-pandemic employment levels.
Moreover, gender disparities in employment and pay persist and, in some cases, have widened across various occupations.
The report calls for caution against counterproductive fiscal tightening by governments and recommends expanding fiscal support to stimulate growth, especially in the face of continued tight global monetary conditions.
Central banks worldwide, grappling with the delicate balance between inflation, growth, and financial stability, face challenging trade-offs. Developing country central banks, in particular, are urged to utilize diverse macroeconomic and macroprudential policy tools to mitigate the adverse effects of monetary tightening in developed economies, as per the report.