Prepare for a Decade of Sluggish Growth, Global Forum President Warns
The global economy is bracing for a decade of low growth unless decisive action is taken, according to Borge Brende, President of the World Economic Forum (WEF).
Speaking at WEF’s “Special Meeting on Global Collaboration, Growth and Energy for Development” in Saudi Arabia, Brende painted a sobering picture of the world’s economic outlook.
He pointed to global debt ratios reaching levels unseen since the 1820s, raising concerns of “stagflation” – a period of slow economic growth accompanied by high inflation and unemployment – in advanced economies.
“The global growth [forecast] this year is around 3.2 [%]. It’s not bad, but it’s not what we were used to — the trend growth used to be 4% for decades,” Brende told CNBC, adding that there was a risk of a slowdown similar to that experienced in the 1970s.
Avoiding a Prolonged Downturn
Brende emphasized the need to prevent a trade war and maintain global cooperation. “We cannot get into a trade war, we still have to trade with each other,” he said.
He urged governments to address the soaring global debt, observing that “we haven’t seen this kind of debt since the Napoleonic Wars.” He suggested exploring strategies to reduce debt without triggering a recession.
Additionally, Brende pointed to persistent inflationary pressures and identified generative artificial intelligence (AI) as a potential opportunity for developing nations.
IMF: Global Debt Alarms
Brende’s warning echoes recent findings by the International Monetary Fund (IMF). The IMF report noted that global public debt had risen to 93% of GDP in 2023, exceeding pre-pandemic levels by 9 percentage points. It projected that global public debt could approach 100 % of GDP by the end of the decade.
The IMF particularly highlighted the high debt levels in China and the United States, emphasizing that loose fiscal policies in the latter could strain interest rates and push up the value of the dollar, exacerbating economic vulnerabilities worldwide.
Resilience and Risks
Earlier this month, the IMF slightly revised its global growth forecast upward, citing the economy’s unexpected resilience despite inflationary pressures and shifting monetary policies. The IMF now predicts global growth of 3.2% in 2024, a modest 0.1% increase from its January forecast.
However, Brende cautioned that the biggest risk facing the global economy is the “geopolitical recession” stemming from tensions between Iran and Israel.
“There is so much unpredictability, and you can easily get out of control. If Israel and Iran escalated that conflict, we could have seen an oil price of 0 overnight. And that would of course be very damaging for the global economy,” he said.
A Call to Action
In light of these challenges, Brende urged governments and international organizations to work together to mitigate risks and promote sustainable economic growth. The fate of the global economy in the coming decade depends on their ability to navigate these complex waters.
Data sourced from: cnbc.com
