UN Trade and Development (UNCTAD) forecasts global economic growth to slow to 2.6% in 2024, just above the 2.5% threshold commonly associated with a recession. This marks the third consecutive year of growth below the pre-pandemic rate, which averaged 3.2% between 2015 and 2019.
A UN Trade and Development report released ahead of the 2024 Spring Meetings of the International Monetary Fund and the World Bank warns that the prevailing focus on inflation overshadows urgent issues like trade disruptions, climate change, and rising inequalities.
It calls for structural reforms and coordinated global efforts, proposing a comprehensive strategy that includes both supply-side policies to boost investment and demand-side measures to improve employment and income.
Growth was driven by consumption
The report highlights the global economy’s growing reliance on private consumption, projected to increase by about 4%, outpacing total income growth (2.6%).
Historically, such increases in consumption have often relied on borrowing. With savings accumulated during the pandemic largely depleted to pre-2020 levels, debt is likely becoming a primary source of consumption.
Soaring debt burdens for many developing countries amid declining aid flows, with outflows to external creditors in 2022 surpassing incoming aid disbursements by almost $50 billion.@UNCTAD intensifies calls to reform the global debt architecture: https://t.co/pfNJupDCB0 pic.twitter.com/VKE0f7hRfS
— UN Trade and Development (@UNCTAD) April 18, 2024
This shift disproportionately benefits wealthier households with access to credit, exacerbating debt burdens for lower and middle-income groups and deepening economic inequalities.
The decline in workers’ share of income
Another worrying trend is that inequality in the labor market continues to rise post-pandemic, with workers in both developed and developing countries earning a reduced share of income.
This indicates that the benefits of economic growth are increasingly reaped by capital owners rather than by workers, widening wage and wealth gaps.
Regional economic outlooks
The report highlights an uneven post-pandemic recovery.
- Africa: Projected to grow at 3.0% in 2024, up slightly from 2.9% in 2023. Armed conflicts and climate impacts pose significant challenges in several countries. The continent’s largest economies – Nigeria, Egypt, and South Africa – are underperforming, affecting overall prospects.
- South America: Economic growth is slowing, with Brazil expected to grow at 2.1%, hampered by external pressures and commodity dependence. Argentina faces a 3.7% contraction due to inflation and complex debt negotiations.
- North America: Growth remains relatively resilient, though challenges continue. The United States is expected to grow at 2.0%, reflecting concerns over high household debt levels.
- Asia: China targets around 5% growth in 2024, capitalizing on robust manufacturing and trade. India’s economy is buoyed by strong public investment and service sector growth, with a forecasted expansion of 6.5% in 2024. Japan is expected to grow at 1.0% amid export demand challenges.
- Europe: Major economies experience economic slowdowns, with France, Germany, and Italy projecting growth of 1.3%, 0.9%, and 0.8%, respectively, due to industrial and fiscal challenges.
- Oceania: Economic growth in the region, particularly in Australia (1.4% growth projected in 2024), is expected to remain subdued, with the low-growth period extending into 2024.