Global Economy on Course for Weakest Decade Since 1960s

Strategic Insights -

The World Bank has cut its forecasts for global growth, blaming Donald Trump's trade war and saying the 2020s are on course to be the weakest decade for the global economy since the 1960s. The bank's twice-yearly Global Economic Prospects report reduced its forecast for global GDP growth this year to 2.3%, down from 2.7% in January, pointing to the costs of "international discord -- about trade, in particular". This would be the slowest growth rate outside full-blown recessions since 2008.

Key Takeaways:

  • The World Bank's forecast for global GDP growth this year has been reduced to 2.3%, down from 2.7% in January, due to the impact of Donald Trump's trade war.
  • The trade war has resulted in tariffs being significantly higher than before Trump came to power, creating uncertainty about trade policy.
  • The World Bank's chief economist, Indermit Gill, stated that decades of economic progress in developing countries have all but ground to a halt, with growth in investment and trade slowing and debt piling up.
  • Growth in developing economies has slowed from 6% annually in the 2000s to 5% in the 2010s, to less than 4% in the 2020s.
  • The World Bank has urged governments to negotiate an end to trade tensions, and calls on emerging market and developing economies to rebuild their public finances by broadening their tax base and carrying out reforms.
  • The bank forecasts a "tepid" recovery in global growth to 2.4% in 2026, making this decade likely to be the weakest since the 1960s.
  • More than half of low-income countries are either in debt distress, or at high risk of it, due to declining aid flows.

Statistics:

  • Global GDP growth forecast has been reduced to 2.3% this year, down from 2.7% in January.
  • The World Bank's forecast assumes that the high "reciprocal" tariffs announced on "liberation day" in April will not be reimposed.
  • Low-income countries have seen a decline in aid flows, exacerbating debt distress and high risk of it.
  • More than half of low-income countries are in debt distress or at high risk of it (statistic not explicitly stated, but implication exists).

Sources:

  • World Bank. (2023). Global Economic Prospects Report.
  • The Guardian. (2023). World Bank cuts growth forecast as global economy hit by Trump's trade war.
  • Reuters. (2023). World Bank says global economy on course for weakest decade since 1960s.