World Bank Warns of Financial 'Wasted Decade' for Developing Nations

Global Economy Anticipated to Slow for Third Consecutive Year in 2024, Posing Challenges for Poor Countries

The World Bank has issued a cautionary note, signaling a potential "wasted decade" for poor countries as the global economy is expected to decelerate for the third consecutive year in 2024. This trajectory could mark the weakest half-decade of growth since the early 1990s, according to the Washington-based institution.

In its half-yearly Global Economic Prospects (GEP) report, focusing predominantly on developing and low-income countries, the World Bank identified a disparate recovery landscape since the onset of the Covid pandemic. The report underscores that developing nations, especially the poorest, are grappling with setbacks, and there's a looming risk of the 2020s becoming a lost opportunity.

Indermit Gill, Chief Economist at the World Bank, emphasized that by the end of 2024, all developed economies are expected to surpass pre-pandemic income levels per capita. In contrast, two-thirds of low-income countries and less than half of fragile or conflict-ridden countries may not achieve the same feat.

Gill warned, "Without a major course correction, the 2020s will go down as a decade of wasted opportunity." Urgent actions, particularly in alleviating debt burdens, are crucial for these countries to prevent stagnation.

The report highlights a significant shift from the robust 6% growth witnessed in 2021 to a more moderate expansion of 3% in 2022 and an estimated 2.6% in 2023. Projections for 2024 anticipate a further slowdown with a growth rate of 2.3%, wherein advanced economies are expected to grow by 1.2%, and emerging market and developing economies may expand by 3.9%.

Gill stressed the importance of increased investment for poor countries and called for urgent measures to ease their debt burdens. The report advocates for a comprehensive policy package to spur investment, strengthen fiscal policy frameworks, and address climate change.

The World Bank underlines the need for a substantial increase in investment of around $2.4 trillion per year in developing countries to achieve key global development goals by 2030. Failure to do so could result in a per capita investment growth rate in developing economies between 2023 and 2024, averaging only 3.7%, half the rate of the previous two decades.

The report also identifies potential risks to its forecast, including geopolitical conflicts such as the war between Russia and Ukraine or the conflict between Israel and Hamas. Such conflicts could disrupt energy supplies, leading to inflationary pressures and impacting global growth.