Emerging market and developing economies need an “investment boom”, the World Bank says, to help stave off the effects of a global economy expected to achieve the slowest half-decade of gross domestic product (GDP) growth in 30 years.

The World Bank’s Global Economic Prospects, published on January 9, stressed that global real GDP growth is set to slow to 2.4% in 2024, down from 2.6% in 2023 and 3% in 2022.

Amid high borrowing costs and global inflationary pressures, this slow growth rate in 2024 reflects “softening labour markets, reduced savings buffers, waning pent-up demand for services, the lagged effects of monetary tightening, and fiscal consolidation”, the report said.

The report makes the case for accelerated investment, specifically in developing economies, as a means of counteracting overall sluggish economic growth rates. 

Ayhan Kose, the World Bank’s deputy chief economist, said in a statement that “investment booms have the potential to transform developing economies” and will “help mitigate the projected slowdown in potential growth in the rest of this decade”.  

Looking at the past 70 years, the World Bank’s report finds that developing economies often reap an “economic windfall” when they sustain a per-capita investment growth rate of at least 4% for six years or more. 

“Countries that had investment accelerations often reaped an economic windfall: output growth increased by about 2 percentage points and productivity growth increased by 1.3 percentage points per year,” the report said. This has coincided with inflation falling, poverty rates dropping and fiscal and external balances improving.

In order to achieve this, developing economies need to “implement comprehensive policy packages to improve fiscal and monetary frameworks, expand cross-border trade and financial flows, improve the investment climate, and strengthen the quality of institutions”, Mr Kose added.

Greenfield investment into emerging and developing economies reached an estimated $737.9bn between January and November last year, according to fDi Markets, up by roughly 25% on the same period in 2022. 

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The report also notes that global trade in goods and services was “virtually flat in 2023”, or roughly 0.2%, which it deems “the slowest expansion outside global recessions in the past 50 years”. The World Bank expects global trade to grow considerably more this year, at roughly 2.3%, which reflects a “partial normalisation of trade patterns”.

However, the report stresses that “the recovery of trade now projected for 2021-24 is the weakest following a global recession in the past half century”.

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” Indermit Gill, the World Bank’s chief economist and senior vice president for development economics, said in a statement accompanying the report. “Near-term growth will remain weak, leaving many developing countries — especially the poorest — stuck in a trap: with paralysing levels of debt and tenuous access to food for nearly one out of every three people.”

The full Global Economic Prospects report can be accessed here.