Private surveys indicate that most developing economies in Asia, including South Korea, Vietnam, and Indonesia, have shown signs of improvement in their manufacturing sectors, with PMI readings edging over 50 for the first time in months. The International Monetary Fund has upgraded its growth forecast for emerging economies in Asia, citing greater-than-expected resilience in the U.S. and several large developing economies, as well as fiscal support in China. While there are positive indicators, there remains a divergence between official and private PMI surveys in China, pointing to an uneven economic landscape.
The World Bank's latest Global Economic Prospects report predicts the global economy to experience its slowest half-decade of GDP growth in 30 years, with global growth projected to slow for the third year in a row. Developing economies are expected to grow just 3.9%, while low-income countries may see weaker growth than previously expected. The report suggests that reforms to boost investment and strengthen fiscal policy could help turn the tide and offers a clear way forward to achieve a sustained investment boom, especially in developing economies. Additionally, the report identifies measures that commodity-exporting developing economies can take to avoid boom-and-bust cycles.
The World Bank predicts that the global economy is heading towards its worst half-decade of growth in 30 years, with growth forecast to slow for the third consecutive year in 2024. Developing economies are expected to be hit the hardest, with sluggish global trade and tight financial conditions weighing heavily on growth. The organization warns that without a major course correction, the 2020s will be remembered as a decade of wasted opportunity, but suggests that governments can turn the tide by increasing investment and strengthening fiscal policy frameworks.
The World Bank has warned that surging interest rates are causing record levels of debt for the world's poorest countries, hindering investments in public health, education, and infrastructure. Low- and middle-income countries paid $443.5 billion towards principal and interest in 2022, the highest level in history, with projections of a 40% increase in 2023 and 2024. Over half of low-income countries are facing debt distress, prompting calls for debt restructuring to avoid a "lost decade." The variable interest rates and a stronger US dollar have made repayment more challenging, leading to an increase in government defaults. The mounting debt burdens have also made it difficult for developing countries to attract new investment and financing, with new loan commitments declining by 23% in 2021. Efforts for debt relief have been slow, with China criticized for being an obstacle to debt restructuring agreements.
The World Bank has downgraded its growth forecasts for advanced economies, including the US, Japan, and Euro area countries, due to higher interest rates and the overhangs from this year's banking crisis. The bank estimates that overall global growth will decelerate to 2.1% in 2023, down from 3.1% in 2022. Emerging and developing economies are forecasted to see a slight uptick in GDP, but excluding China, growth in developing economies would be less than 3%. The reduced forecasts for growth reflect broad-based downgrades stemming from several overlapping shocks, including spillover effects from the recent banking crisis seen in the US and advanced economies.
The upcoming El Niño event could cause a $3 trillion economic loss over the next several years, with low-income tropical countries being hit the hardest, according to a new study. The El Niños of 1982-83 and 1997-98 led to worldwide losses of $4.1 trillion and $5.7 trillion, respectively, which dragged on for more than five years after the climatic events had dissipated. The economic consequences of El Niño are more concentrated in the tropics, but other regions will feel the heat as well.
Ajay Banga, former CEO of Mastercard, has been confirmed as the new president of the World Bank, succeeding David Malpass. Banga, who was raised in India, brings deep experience with developing economies and financial expertise to the global institution. His appointment comes at a critical moment of transition for the World Bank, which is facing urgent questions about its lending model, climate change, poverty, and the war in Ukraine. Banga will face a challenging diplomatic environment, trying to satisfy the climate ambitions of the United States while maintaining the bank’s focus on development.
World Bank President David Malpass has expressed concern over the lack of transparency in some of the loans China has been making to developing economies in Africa, as countries such as Ghana and Zambia struggle to repay their debts to Beijing. China has refuted suggestions that it is exploiting other countries with its financial support. The competition between the US and China for influence in Africa is providing different options for developing countries, but Malpass warns against offering collateral as an inducement to make a loan, as it locks it up for generations.
