A “prolonged period of low growth looms on the horizon.” This is the conclusion of the new report released by the United Nations Department of Economic and Social Affairs regarding the prospects of the global economy, which anticipates a slowdown in global economic growth in the current year to 2.4%, compared to approximately 2.7% in the previous year and below the pre-pandemic rates of 3%.
The global economy managed to avoid the worst recession scenario last year, but new challenges, including the escalating situation in the Middle East and maritime tensions, have increased the likelihood of entering a prolonged period of low growth.
The report highlights that continued rising interest rates, increased conflict escalations, slowing international trade, and a rise in climate disasters pose significant challenges to global growth.
The report warns that the possibility of a prolonged tightening of credit conditions and higher borrowing costs represents strong headwinds for the debt-laden global economy, which requires more investments to boost growth, combat climate change, and accelerate progress toward sustainable development goals.
United Nations Secretary-General Antonio Guterres stated that 2024 must be the year “we get out of this quagmire.” He added that through unleashing significant and bold investments, “we can drive sustainable development and climate action, putting the global economy on a stronger growth path for all.”
Guterres emphasized the need to build on the progress made in the past year towards mobilizing at least $500 billion annually in long-term, low-cost financing for sustainable development and climate action.
Economic Slowdown to Affect Advanced and Emerging Economies
The report predicts that growth will slow in many major advanced economies, especially the United States, in 2024 due to rising interest rates, a slowdown in consumer spending, and weak labor markets.
It also noted that the short-term growth prospects for many developing countries, particularly in East Asia, West Asia, Latin America, and the Caribbean, have deteriorated due to tightening financial conditions, reduced fiscal space, and a slowdown in external demand.
Low-income and fragile economies face increasing pressures on their balance of payments and debt sustainability, according to the report.
The report also stated that the economic prospects of small island developing states, in particular, are constrained by heavy debt burdens, rising interest rates, and increased climate-related vulnerabilities, threatening to reverse gains made in sustainable development goals in some cases.
Inflation Calming Down
The UN report expects global inflation to decrease further, from 5.7% in 2023 to 3.9% in 2024.
However, it pointed out that price pressures remain high in many countries, and any further escalation of geopolitical conflicts threatens to revive increases in inflation. The report noted that in about a quarter of all developing countries, especially in West Asia and Africa, key labor market indicators, including unemployment rates, have not yet returned to pre-pandemic levels.
It also added that the global gender employment gap remains high, and gender wage gaps have not only persisted but have widened in some occupations.
