- The projected decline in global growth may affect climate investment in developing countries.
- To meet climate and other key global development goals by 2030, developing countries must secure a substantial increase in investment, about $ 2.4 trillion a year.
The newly released World Bank ‘Global Economic Prospects’ report has projected that global growth will be slow for the third year in a row, reaching 2.4 per cent in 2024 from 2.6 per cent in 2023. This is significantly below the 2010s average and the slowest half-decade of gross domestic product (GDP) growth in 30 years. The report notes that this slowdown comes as the world nears the midpoint of what it intended to be a transformative decade for development which would affect climate investment in developing countries.
To meet climate and other critical global development goals by 2030, developing countries must secure a substantial increase in investment, about $ 2.4 trillion a year. However, the outlook is grim without a robust policy package. This is as it projects that per capital investment growth in developing economies will average only 3.7 per cent between 2023 and 2024, just over half the rate of the previous two decades. In addition, it forecasts that developing economies will grow at 3.9 per cent, more than one percentage point below the previous decade’s average. After a disappointing performance last year, low-income countries should grow 5.5 per cent, weaker than previously expected.
The report states, “The medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade and the tightest financial conditions in decades. Furthermore, borrowing costs for developing economies, especially those with poor credit ratings, are likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms. By the end of 2024, people in about one out of every four developing countries and about 40 per cent of low-income countries will still be poorer than they were on the eve of the Covid-19 pandemic in 2019.”
On his part, World Bank Group chief economist and senior VP, Indermit Gill, notes, “Without a major course correction, the 2020s will go down as a decade of wasted opportunity. Near-term growth will remain weak, leaving many developing countries, especially the poorest, stuck in a trap, with paralysing levels of debt and tenuous access to food for nearly one out of every three people. That would obstruct progress on many global priorities.”
While the global economy is in a better place than it was a year ago – the risk of a worldwide recession has receded, mainly because of the strength of the US economy – mounting geopolitical tensions could create fresh near-term hazards for the world economy. “However, opportunities still exist to turn the tide. This report offers a clear way forward by spelling out the transformation that can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks,” Gill adds.