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Global economic growth improves, but “downsides” lurk
The world economy is expected to grow 2.7 percent in 2024, above the 2.4 percent projected at the beginning of the year. Growth will reach 2.8 percent in 2025, which represents a slight increase.
These changes are mainly due to better than expected performance in some large developed and emerging countries, namely Brazil, India, Russia and the United States.
Inflation falls, wages rise
Inflation has also fallen from its 2023 peak, said Shantanu Mukherjee of the UN Department of Economic and Social Affairs (DESA), presenting the report for journalists in New York.
“In developed countries, tight labor markets are seeing wage increases for some parts of the population and also attracting people into the workforce, which is important,” he added.
However, the outlook is only cautiously optimistic given higher interest rates for longer, debt sustainability risks and ongoing geopolitical tensions.
Islands at risk
Increasingly worsening climate shocks are also a challenge, threatening decades of development gains, especially for the world’s Least Developed Countries (LDCs) and small island developing States (SIDS).
Although the outlook for SIDS is being revised upwards to around 3.3% every year, Mukherjee said this figure is still below the pre-pandemic average, meaning that “lost ground is not yet being recovered”.
In the case of Africa and the LDCs in general, the outlook is revised downwards to around 3.3 percent growth in 2024.
Concern for the continent
“This is particularly worrying because Africa is home to around 430 million people living in extreme poverty and represents close to 40 percent of the global undernourished population,” he explained. Furthermore, two-thirds of the countries with high inflation listed in the report are on the continent.
“At the same time, a cause for concern is that the room for maneuver of African governments is also decreasing,” he continued.
“In 2024, more than a quarter of public revenues, on average, on this continent were allocated to interest payments. This is again about 10 percentage points higher than the average for the years immediately before the pandemic.”
For developing countries, on average, the debt situation is not so dire, but he was concerned that investment growth would continue to fall.
These “disadvantages” are further compounded by risks such as inflation, which is both a symptom of underlying fragility and a concern in its own right.
Break the ‘resource curse’
The report also contains a special section on critical minerals such as lithium, nickel, cobalt and copper, which are essential for the clean energy transition.
Countries that possess these resources will, however, need smart policies as well as effective implementation capabilities to reap the benefits.
In the past, mineral sector-driven growth has often been associated with environmental damage, stunted development of other sectors, poverty, conflict and other adverse outcomes known collectively as the “resource curse”.
“It is imperative that developing countries design and implement well-targeted and timely economic, social and environmental policies to optimize the benefits of their critical mineral reserves and avoid another cycle of the resource curse,” the report states.