World Economic Situation and Prospects 2024 Report

News Excerpt:

In 2024, India is projected to grow at 6.2% supported by robust domestic demand and strong growth in the manufacturing and services sectors, the United Nations report said.

About the report:

  • The World Economic Situation and Prospects 2024 is a report produced by the United Nations Department of Economic and Social Affairs (UN DESA), in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions etc.
  • The world economy continues to face multiple crises, jeopardizing progress toward Sustainable Development Goals (SDGs).
  • In 2024, the world must seize the opportunity to create a more inclusive, resilient global economy that works for everyone, everywhere.

Highlights of the report:

Global Economy:

  • Global economic growth is projected to slow from an estimated 2.7% in 2023 to 2.4% in 2024, trending below the pre-pandemic growth rate of 3%.
  • The world economy proved more resilient than expected in 2023, however, it masks both short-term risks and structural vulnerabilities. 
  • Growth prospects for many developing countries, especially vulnerable and low-income countries, have remained weak, making a full recovery from pandemic losses ever more elusive.
  • Global merchandise trade and global industrial production remain exceptionally weak amid cyclical and structural headwinds and during the third quarter of 2023, the manufacturing Purchasing Managers’ Index was in contraction territory in all of the world’s largest economies except India.
  • Slowing global demand, unresolved trade tensions between the largest trading partners, and geopolitical conflicts are affecting trade flows in the short term. The war in Ukraine and the sanctions imposed on Russia have also shaped global trade patterns.
  • The report highlighted that climate change-related events continued to hurt the South Asian region in 2023.  Droughts intensified considerably during July and August, affecting most of India, Nepal, and Bangladesh, while Pakistan recorded above-average rainfall.
    • Warmer-than-average temperatures will likely boost power demand and may also strain local hydropower resources amid lower levels of precipitation, which could lead to power rationing constraining industrial activity, as has already been experienced by some South Asian countries in recent years.
  • The global labor market displays divergent trends between developed and developing countries post-pandemic. 
    • Developed countries experienced a robust recovery with low unemployment rates, notably 3.7% in the US and 6.0% in the EU in 2023, coupled with rising nominal wages and narrowing wage inequality. However, real income losses and labor shortages pose challenges.
  • Global inflation, a key concern over the past two years, is showing signs of easing. 
    • Global headline inflation fell from 8.1% in 2022 to an estimated 5.7% in 2023 and is projected to decline to 3.9% in 2024.
  • Debt sustainability has emerged as a critical challenge, especially for developing countries, in the wake of rising debt levels and changing global financial conditions.

Indian Economy:

  • The UN revised India’s Gross Domestic Product (GDP) growth forecast for the 2024 calendar year to 6.2% from 6.7%.
  • The report said GDP in the larger South Asian region grew by an estimated 5.3% in 2023 and is projected to increase by 5.2% in 2024, driven by a robust expansion in India, “which remains the fastest-growing large economy in the world”. 
  • India’s GDP is projected to increase to 6.6% in 2025. The 5.2% in 2024 would be mainly supported by resilient private consumption and strong public investment.
  • In 2022, FDI (foreign direct investment) flows to India rose by 10%, making it the third-largest host country for announced greenfield projects.
  • Another driver of fixed capital formation in the country is the increased government spending on roads, railways, and renewable energy projects, which can have a crowd-in effect on private sector investment.
  • High levels of external debt and still-rising interest rates are constraining developing country access to financing in the international capital markets such as India and Brazil.
  • In India, labour market indicators improved over the year, with labour force participation increasing in August to its highest rate since the onset of the pandemic.
  • The unemployment rate averaged 7.1% in September, the lowest value in a year.
  • The report noted that the consumer price inflation in India is expected to decelerate from 5.7% in 2023 to 4.5% in 2024, staying within the two to six per cent medium-term inflation target range set by the Central Bank.

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