World Bank warns of ‘wasted’ decade because of crises

WASHINGTON — The global economy is at risk of a “wasted” decade and the weakest stretch of growth in 30 years, the World Bank warned Tuesday, saying a sluggish recovery from the pandemic and crippling wars in Ukraine and the Middle East are expected to weigh heavily on output.

In its semiannual Global Economic Prospects report, the World Bank projected the growth in world output will slow further in 2024, declining to 2.4% from 2.6%. Although the global economy has been surprisingly resilient, the report warned its forecasts were subject to heightened uncertainty because of the two wars, a diminished Chinese economy and the increasing risks of natural disasters caused by global warming.

The converging crises in recent years have put the world economy on track for the weakest half-decade in 30 years.

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” said Indermit Gill, the World Bank Group’s chief economist.

Global growth is projected to slow for the third straight year in 2024. Developing countries are bearing the brunt of the slowdown, with high borrowing costs and anemic trade volumes weighing on their economies.

Although policymakers have made progress in bringing inflation down from its 2022 high, the war in the Gaza Strip between Israel and Hamas is threatening to become a broader conflict that could spur a new bout of price increases by causing the cost of oil and food to spike.

“The recent conflict in the Middle East, coming on top of the Russian Federation’s invasion of Ukraine, has heightened geopolitical risks,” the report said. “Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation.”

The recent drone and missile attacks in the Red Sea by the Iranian-backed Houthi militia have already affected international commerce by pushing up oil prices and freight and insurance rates while diverting maritime traffic to a much longer and costlier route around Africa.

Beyond the ongoing wars, signs of fragility in the Chinese economy also remain a worry. World Bank economists pointed to lingering weakness in China’s property sector and lackluster consumer spending as evidence that the world’s second-largest economy will continue to underperform this year. They suggested that could pose headwinds for some of China’s trading partners in Asia.

And Europe and the United States are also poised for another year of weak output in 2024.