Segnalazione dalla Banca Mondiale: GLOBAL ECONOMIC PROSPECTS, JANUARY 2024

"Dear Colleagues. 

We have just released the January 2024 edition of the Global Economic Prospects report. 

By one measure, the global economy is in a better place than it was a year ago: the risk of a global recession has receded, largely because of the strength of the U.S. economy. 

However, global growth is projected to slow for the third year in a row amid tight monetary policy, restrictive financial conditions, and feeble global trade and investment. 

Over 2020-24, the forecast entails the weakest start to a decade for global growth since the 1990s—another period characterized by geopolitical strains and a global recession. 

Downside risks include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, trade fragmentation, and climate-related disasters. In addition to the global and regional outlook chapters, this edition includes analytical studies on investment accelerations in emerging market and developing economies and fiscal policy challenges in commodity exporters.

I summarize the main messages of the report below (to download the full report, please use this link). Thank you for your interest in our products. Best. Ayhan

Global Outlook. Global growth is expected to slow to 2.4 percent in 2024—the third consecutive year of deceleration—reflecting the lagged and ongoing effects of tight monetary policies to rein in decades-high inflation, restrictive credit conditions, and anemic global trade and investment. 

Near-term prospects are diverging, with subdued growth in major economies alongside improving conditions in emerging market and developing economies (EMDEs) with solid fundamentals. Meanwhile, the outlook for EMDEs with pronounced vulnerabilities remains precarious amid elevated debt and financing costs. 

Downside risks to the outlook predominate. 

The recent conflict in the Middle East, coming on top of the Russian Federation’s invasion of Ukraine, has heightened geopolitical risks. 

Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation. 

Other risks include financial stress related to elevated real interest rates, persistent inflation, weaker-than-expected growth in China, further trade fragmentation, and climate change-related disasters. Against this backdrop, policy makers face enormous challenges and difficult trade-offs. 

International cooperation needs to be strengthened to provide debt relief, especially for the poorest countries; tackle climate change and foster the energy transition; facilitate trade flows; and alleviate food insecurity. EMDE central banks need to ensure that inflation expectations remain well-anchored and that financial systems are resilient. 

Elevated public debt and borrowing costs limit fiscal space and pose significant challenges to EMDEs—particularly those with weak credit ratings—seeking to improve fiscal sustainability while meeting investment needs. 

To boost longer-term growth, structural reforms are needed to accelerate investment, improve productivity growth, and close gender gaps in labor markets. 

The Magic of Investment Accelerations. 

Investment powers economic growth, helps drive down poverty, and will be indispensable for tackling climate change and achieving other key development goals in EMDEs. Without further policy action, investment growth in these economies is likely to remain tepid for the remainder of this decade. But it can be boosted. This chapter offers the first comprehensive analysis of investment accelerations—periods in which there is a sustained increase in investment growth to a relatively rapid rate—in EMDEs. During these episodes over the past seven decades, investment growth typically jumped to more than 10 percent per year, which is more than three times the growth rate in other (non-acceleration) years. Countries that had investment accelerations often reaped an economic windfall: output growth increased by about 2 percentage points and productivity growth increased by 1.3 percentage points per year. Other benefits also materialized in the majority of such episodes: inflation fell, fiscal and external balances improved, and the national poverty rate declined. Most accelerations followed, or were accompanied by, policy shifts intended to improve macroeconomic stability, structural reforms, or both. These policy actions were particularly conducive to sparking investment accelerations when combined with well-functioning institutions. A benign external environment also played a crucial role in catalyzing investment accelerations in many cases.

Fiscal Policy in Commodity Exporters: An Enduring Challenge. Fiscal policy has been about 30 percent more procyclical and about 40 percent more volatile in commodity-exporting EMDEs than in other EMDEs. 

Both procyclicality and volatility of fiscal policy—which share some underlying drivers—hurt economic growth because they amplify business cycles. Structural policies, including exchange rate flexibility and the easing of restrictions on international financial transactions, can help reduce both fiscal procyclicality and fiscal volatility. 

By adopting average advanced-economy policies regarding exchange rate regimes, restrictions on cross-border financial flows, and the use of fiscal rules, commodity-exporting EMDEs can increase their GDP per capita growth by about 1 percentage point every four to five years through the reduction in fiscal policy volatility. 

Such policies should be supported by sustainable, well-designed, and stability-oriented fiscal institutions that can help build buffers during commodity price booms to prepare for any subsequent slump in prices. 

A strong commitment to fiscal discipline is critical for these institutions to be effective in achieving their objectives.

PS: For our other periodical products, please visit: Commodity Markets Outlook and Global Monthly. For our recent study on long-term growth, see Falling Long-Term Growth Prospects. For our databases of potential growth and inflation, see Potential Growth: A Global Database and One-Stop Source: A Global Database of Inflation. For our work on debt challenges, see Global Waves of Debt: Causes and Consequences and A Cross-Country Database of Fiscal Space. For our analytical work on topical policy issues, please visit Policy Research Working Papers.

M. Ayhan Kose

Deputy Chief Economist and Director of Prospects Group

World Bank

T +1 (202) 473-8350

E  akose@worldbank.org

W ayhankose

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