The World Bank, widely known for its work towards reducing poverty and fostering prosperity in developing countries, recently published its Global Economic Prospects Report. This report creates a sobering outlook for the world economy till 2024, predicting it to be the worst half-decade of GDP (Gross Domestic Product) growth in the last 30 years.
Key Highlights of the Global Economic Prospects Report
One of the primary takeaways from the report is the anticipated slowest half-decade of GDP growth in 30 years. The global economy is projected to experience only a meager growth rate of 2.4% in 2024.
Despite fears of a recession, the report offers a silver lining by suggesting an improved outlook compared to the previous year. Much of this optimistic view is attributed to the strong performance of the US economy.
However, the report does not shy away from highlighting the potential risks that escalating geopolitical tensions present to the global economy.
Deteriorating Outlook for Developing Economies
The report notes a concerning drop in the medium-term outlook for many developing economies. This disappointing projection is a result of slowing growth, sluggish global trade, and tight financial conditions.
Also, the borrowing costs for developing economies, especially those with low credit ratings, are predicted to remain high, making financial recovery even more challenging.
Challenges in Global Trade and High Debt Levels
According to the report, the 2024 forecast for global trade growth is only half the average of the decade preceding the pandemic. This slowdown, combined with weak near-term growth, can lead to high debt levels in developing countries, posing significant economic challenges.
Call for Urgent Action
To avoid a wasted opportunity in the current decade, the report calls for immediate action to accelerate investment and fortify fiscal policy frameworks. It particularly emphasizes the need for a massive increase, totaling around USD 2.4 trillion per year, in investment by developing countries to address climate change and meet other key global development goals by 2030.
In addition to increased investments, the report suggests implementing comprehensive policy packages to improve fiscal and monetary frameworks, expanding cross-border trade, bettering the investment climate, and strengthening institutional quality.
A Brief about the World Bank
Originally established as the International Bank for Reconstruction and Development (IBRD) in 1944, along with the IMF, the IBRD later transformed into what we know as the World Bank today. The World Bank Group comprises five institutions working collaboratively to foster sustainable solutions for poverty reduction and shared prosperity in developing nations. It is one of the United Nations’ specialized agencies and has 189 member countries, including India.
Fundamentally, four main reports are produced by the World Bank- the Human Capital Index, World Development Report, and reports from two of its five development institutions: the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID). However, it’s worth mentioning that India isn’t a member of ICSID.
World Bank and UPSC Civil Services Examination
Knowledge about the World Bank’s workings and its various reports plays an essential role in the UPSC Civil Services Examination. Previous years’ questions have focused on topics such as ‘IFC Masala Bonds’ and India’s ranking in the ‘Ease of Doing Business Index,’ both connected to the World Bank. Thus, a thorough understanding of the World Bank and its related subject matter could prove beneficial for aspirants.