World Bank’s grim warning for global growth as Jim Chalmers says Australia is in a better spot
The global economy is on track to record the slowest half-decade GDP growth in 30 years, according to a World Bank report warning rising geopolitical tensions could spark ‘hazards’.
The global economy is on track to record the slowest half-decade of GDP growth in 30 years, according to a new World Bank report warning that rising geopolitical tensions could spark damaging “near-term hazards”.
The Global Economic Prospects report, released on Wednesday, says growth in the East Asia and Pacific region is forecast to decelerate to 4.4 per cent on the back of slowing economic activity in China.
Despite the risk of global recession receding due to a strengthening US economy, growth is projected to slow for the third consecutive year from 2.6 per cent to 2.4 per cent in 2024.
While major economies are emerging “mostly unscathed after the fastest rise in interest rates in 40 years”, World Bank chief economist Indermit Gill projects a grim outlook beyond the next two years.
“The outlook is dark. What looms … is a wretched milestone: the weakest global growth performance of any half-decade since the 1990s, with people in one out of every four developing economies poorer than they were before the pandemic,” Mr Gill said.
“The forecasts in Global Economic Prospects imply that most economies – advanced as well as developing – are set to grow more slowly in 2024 and 2025 than they did in the decade before Covid. Global growth is expected to slow for a third year in a row – to 2.4 per cent – before ticking up to 2.7 per cent in 2025.
“Those rates, however, would still be far below the 3.1 per cent average of the 2010s. Per capita investment growth in 2023 and 2024 is expected to average just 3.7 per cent – barely half the average of the previous two decades. Without corrective action, global growth will remain well below potential for the remainder of the 2020s.”
Mr Gill said while the forecasts were “dismal”, countries could pull policy levers to avoid worst-case scenarios.
The World Bank says global trade this year is expected to be half the average in the decade before the pandemic, with borrowing costs for developing countries likely to remain steep.
Jim Chalmers warned that “continuing geopolitical uncertainty, conflict in the Middle East and Europe, a slowdown in China and higher interest rates across the world are impacting the global economy”.
Ahead of the Australian Bureau of Statistics releasing monthly inflation, job vacancies and construction activity data on Wednesday, the Treasurer said “Australia has not been immune from this global uncertainty”.
“We know many households are under pressure from high but moderating inflation, higher interest rates and severe weather events,” Dr Chalmers said.
With families and businesses struggling following 13 rate hikes, soaring insurance premiums, record grocery prices and higher fuel costs, Dr Chalmers has flagged the government is working on a new cost-of-living relief package ahead of the May budget. “While there is no shortage of challenges, Australia starts 2024 from a position of genuine economic strength.”
More Coverage
Disability support outside the NDIS
With the government looking to take pressure off the National Disability Insurance Scheme, consultations are about to get under way about what broader disability support might look like.
Progressive climate of fear as nuclear support takes hold
Chris Bowen will weaponise government modelling warning of blackouts under the Coalition’s energy policy and demand-supply gaps of up to 49 per cent by 2035, amid growing support for Peter Dutton’s nuclear pitch in inner-city seats.