World Bank’s Global Economic Prospects Report

• 15 Jan 2024

For Prelims: World Bank (WB), GDP (Gross Domestic Product), Global Trade, Pandemic, Debt.

For Mains: World Bank’s Global Economic Prospects Report, Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Source: DTE

Why in News?

Recently, the World Bank (WB) has released its Global Economic Prospects Report, which shows that the global economy may witness a poor performance by the end of 2024, the slowest half-decade of GDP (Gross Domestic Product) growth in 30 years.

What are the Key Highlights of the Report?

• Slowest Half-Decade of GDP Growth in 30 Years:
  • The global economy is projected to experience the slowest half-decade of GDP growth in three decades, with a growth rate of 2.4% in 2024.
• Improved Outlook Compared to Previous Year:
  • The risk of a global Recession has receded, attributed to the strength of the US economy, resulting in a better global economic position than the previous year.
  • But mounting geopolitical tensions could create fresh near-term hazards for the world economy.
• Deteriorating Medium-Term Outlook for Developing Economies:
  • While the global economy is in a better place than a year ago, the medium-term outlook has worsened for many developing economies. Factors include slowing growth, sluggish Global Trade, and tight financial conditions.
• Challenges in Global Trade and Borrowing Costs:
  • Global trade growth in 2024 is expected to be only half the average in the decade preceding the Pandemic.
  • Borrowing costs for developing economies, especially those with low credit ratings, are expected to remain high.
• Global Growth:
  • Global growth is projected to slow for the third consecutive year, dropping from 2.6% in 2023 to 2.4% in 2024.
  • Developing economies are projected to grow just 3.9%, more than one percentage point below the average of the previous decade.
  • Low-income countries are projected to grow by 5.5%, lower than initially expected.
• Weak Near-Term Growth and High Debt Levels:
  • There will be weak near-term growth, particularly in developing countries, leading to high levels of Debt and limited access to food. That would obstruct progress on many global priorities.
• Recommendations:
  • There is a need for urgent action to accelerate investment and strengthen fiscal policy frameworks to avoid a wasted opportunity in the current decade.
  • The report advocates for a 'formidable' increase in investment by developing countries, approximately USD 2.4 trillion per year, to address climate change and achieve other key global development goals by 2030.
  • The developing economies need to implement comprehensive policy packages, including improvements to fiscal and monetary frameworks, expansion of cross-border trade and financial flows, betterment of the investment climate, and strengthening of institutional quality.

What is World Bank?

• About:
  • It was created in 1944, as the International Bank for Reconstruction and Development (IBRD) along with the IMF. The IBRD later became the World Bank.
  • The World Bank Group is a unique global partnership of five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries.
  • The World Bank is one of the United Nations' specialized agencies.
• Members:
  • It has 189 member countries.
  • India is also a member country.
• Major Reports:
  • Human Capital Index.
  • World Development Report.
• Its Five Development Institutions:
  • International Bank for Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC).
  • Multilateral Guarantee Agency (MIGA)
  • International Centre for the Settlement of Investment Disputes (ICSID)
    • India is not a member of ICSID.

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Q. With reference to ‘IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/ are correct? (2016)

1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.

Select the correct answer using the code given below:

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Ans: (c)

Q. India’s ranking in the ‘Ease of Doing Business Index’ is sometimes seen in the news. Which of the following has declared that ranking? (2016)

(a) Organization for Economic Cooperation and Development (OECD)
(b) World Economic Forum
(c) World Bank
(d) World Trade Organization (WTO)

Ans: (c)