Global Gross Domestic Product (GDP) growth is projected to slow from 2.7 per cent in 2023 to 2.4 per cent in 2024, says the World Economic Situation and Prospects (WESP) 2024.

The report, launched by the Economic Commission for Africa (ECA) in Addis Ababa, Ethiopia, said global growth would improve moderately to 2.7 per cent in 2025 but would remain below the pre-pandemic trend growth rate of three per cent.

Speaking on the report in a statement on Friday, Adam Elhiraika, the director of the macroeconomics and governance division of ECA, said tight financial conditions, coupled with a growing risk of geopolitical fragmentation, posed increasing risks to global trade and industrial production.

He said while the world economy avoided the worst-case scenario of a recession in 2023, a protracted period of low growth loomed.

According to Mr Elhiraika, growth prospects for many developing countries, especially vulnerable and low-income countries, remained weak, making a full recovery from pandemic losses more elusive.

“The global economic slowdown, tighter monetary and fiscal conditions, and high debt sustainability risks will remain a drag on the region’s growth prospects.

“The unfolding climate crisis and extreme weather events will undermine agricultural output and tourism, while geopolitical instability will continue to adversely impact several subregions in Africa, especially the Sahel and North Africa,” Mr Elhiraika said.

He noted that the world economy proved more resilient than expected in 2023 amid significant global monetary tightening and lingering policy uncertainties.

“This is even as multiple shocks arise from conflict and climate change, which will affect the lives and livelihoods of millions, further jeopardising progress towards sustainable development,” the director added.

The report indicates that developing countries face divergent near-term growth prospects. The economic growth in Africa is projected to remain weak, increasing from an average of 3.3 per cent in 2023 to 3.5 per cent in 2024.

The report says that after surging for two years, global inflation eased in 2023 but remained above the 2010–2019 average.

Global headline inflation fell from 8.1 per cent in 2022, the highest value in almost three decades, to an estimated 5.7 per cent in 2023.

Similarly, Hopestone Chavula, ECA Economic Affairs Officer, who presented the report, highlighted that although global inflation was ebbing, food price inflation could exacerbate food insecurity and poverty.

He said that after surging for two years, global inflation eased in 2023 but remained above the 2010–2019 average.

“In addition to raising interest rates, the major developed country central banks started reducing the assets on their balance sheets, a process known as quantitative tightening, in 2022 and accelerated the pace in 2023 to reduce excess liquidity,” Mr Chavula said.

He said that the higher borrowing costs will exacerbate debt sustainability risks for developing countries.

According to him, monetary tightening by major developed country central banks will have significant spillover effects on developing countries.

The report also indicates that global investment trends will remain weak and subdued.

Real gross fixed capital formation grew by an estimated 1.9 per cent in 2023, down from 3.3 per cent in 2022 and far below the average four per cent growth rate from 2011 to 2019.

Also, international trade is losing steam as a driver of growth. In 2023, global trade growth weakened significantly to an estimated 0.6 per cent, a sharp decline from 5.7 per cent in 2022.

It is expected to recover to 2.4 per cent in 2024, remaining below the pre-pandemic trend of 3.2 per cent.

This report attributes the slowdown to a slump in merchandise trade; by contrast, trade in services, particularly tourism and transport, continued to recover.

According to Mr Chavula, central banks worldwide are expected to continue facing a delicate balancing act and difficult trade-offs in 2024 as they strive to manage inflation, revive growth, and ensure financial stability.

On fiscal space, Mr Chavula said this was shrinking amid higher interest rates and tighter liquidity.

“Sharp increases in interest rates since the first quarter of 2022 and tighter liquidity conditions have adversely affected fiscal balances, renewing concerns about fiscal deficits and debt sustainability.

“Countries implemented bold and timely fiscal policy measures in response to the pandemic crisis and to stimulate recovery,” he said.

On meeting the SDGs by 2030, the report indicates that strengthening multilateralism will accelerate SDG progress.

“The world remains vulnerable to disruptive shocks, including a rapidly unfolding climate crisis and escalating conflicts.

“The urgency and imperative of achieving sustainable development underscore that strong global cooperation is needed now more than ever,” says the report. 

(NAN)