ECA projects slow global GDP growth in 2024

The Economic Commission for Africa (ECA) says global Gross Domestic Product (GDP) will experience slow growth from 2.7 per cent in 2023 to 2.4 per cent in 2024.

Mr Adam Elhiraika, Director, Macroeconomics and Governance Division of ECA, said this in a statement on the commission’s website on Sunday.

Elhiraika said this was contained in the World Economic Situation and Prospects (WESP) 2024 report that the ECA inaugurated in Addis Ababa, Ethiopia.

According to him, growth is forecast to improve moderately to 2.7 per cent in 2025 but will remain below the pre-pandemic trend growth rate of 3.0 per cent.

Elhiraika explained that tight financial conditions, coupled with a growing risk of geopolitical fragmentation, posed increasing risks to global trade and industrial production.

He said: “while the world economy avoided the worst-case scenario of a recession in 2023, a protracted period of low growth looms large.

” Growth prospects for many developing countries, especially vulnerable and low-income countries, have remained weak, making a full recovery of pandemic losses ever more elusive.

“The global economic slowdown, tighter monetary and fiscal conditions, and high debt sustainability risks will remain a drag on the region’s growth prospects.

“The unfolding climate crisis and extreme weather events will undermine agricultural output and tourism, while geopolitical instability will continue to adversely impact several subregions in Africa, especially the Sahel and North Africa.”

According to him, the world economy proves more resilient than expected in 2023 amid significant monetary tightening and lingering policy uncertainties worldwide .

Elhiraika said this was even as multiple shocks from conflict and climate change, which had an effect on the lives and livelihoods of millions, further jeopardised progress toward sustainable development.

“The report indicates that developing countries face divergent near-term growth prospects.

“The economic growth in Africa is projected to remain weak, increasing from an average of 3.3 per cent in 2023 to 3.5 per cent in 2024.”

“The report says that after surging for two years, global inflation eased in 2023 but remained above the 2010-2019 average.

“Also, global headline inflation fell from 8.1 per cent in 2022, the highest value in almost three decades, to an estimated 5.7 per cent in 2023,” he added.

Meanwhile, Mr Hopestone Chavula, ECA’s Economic Affairs Officer who presented the report, said that while global inflation was ebbing, food price inflation could exacerbate food insecurity and poverty.

Chavula said that in addition to raising interest rates, the major developed country central banks started reducing the assets on their balance sheets, a process known as quantitative tightening, in 2022.

He said they accelerated the pace in 2023 to reduce excess liquidity. Adding that the higher borrowing costs would exacerbate debt sustainability risks for developing countries.

According to him, monetary tightening by these major developed country central banks will have significant spillover effects on developing countries.

“The report says the global investment trends will remain weak. Global investment growth is likely to remain subdued.

“Real gross fixed capital formation grew by an estimated 1.9 per cent in 2023, down from 3.3 per cent in 2022 and far below the average growth rate of 4.0 per cent during the period 2011- 2019.

“International trade is losing steam as a driver of growth. In 2023, global trade growth weakened significantly to an estimated 0.6 per cent, a sharp decline from 5.7 per cent in 2022.

” It is expected to recover to 2.4 per cent in 2024, remaining below the pre-pandemic trend of 3.2 per cent.

” This slowdown is attributed to a slump in merchandise trade. By contrast, trade-in services, particularly tourism and transport, continued to recover,” he said.

According to Chavula, central banks worldwide are expected to continue facing a delicate balancing act and difficult trade-offs in 2024 as they strive to manage inflation, revive growth, and ensure financial stability.

He said that central banks in developing economies would face the additional challenges of growing balance-of payments concerns and debt sustainability risks.

He, therefore, charged the banks to navigate a delicate balance between inflation, growth, and financial stability.

On fiscal space, Chavula said it was shrinking amid higher interest rates and tighter liquidity.

He said industrial policy, which was increasingly seen as crucial for fostering structural changes and supporting a green transition, was being revived and transformed.

” This shift is aimed at fixing market failures and aligning innovation with broader development goals. Innovation policies are also changing, with more ambitious, systemic, and strategic approaches being employed.

“On meeting the SDGs by 2030, the report indicates that strengthening multilateralism will accelerate SDGs progress.

“The world remains vulnerable to disruptive shocks, including a rapidly unfolding climate crisis and escalating conflicts.

“The urgency and imperative of achieving sustainable development underscore that strong global cooperation is needed now more than ever,” he quoted the report as saying.