The World Bank released on January 9, 2024 its “Global Economic Prospects – January 2024” report in which it estimated world economic growth to have dropped from around 3.0% in 2022 to 2.6% in 2023, projecting growth to attain 2.4% in 2024 and 2.7% in 2025. The year 2024 forecasts represent the third consecutive year of global GDP growth deceleration amid the continuing effects of monetary tightening policies present during the current global high inflationary environment, in addition to restrictive financial conditions and feeble global trade growth. The World Bank noted that the recent conflict in the Middle East has amplified geopolitical risks and increased uncertainty levels in commodity markets which could have negative repercussions on global growth. The conflict came at a time when the world economy is trying to adapt to the lingering effects of the overlapping shocks of the past four years, namely the COVID-19 pandemic, Russia’s invasion of Ukraine, the increase in inflation and the sharp tightening of global monetary conditions that followed. In this vein, the report commented that conflict escalation could result in a surge in energy prices and persistent inflation levels.

The report revealed that growth in advanced economies and in China in 2024 is expected to attain levels below the average growth observed during the 2010-2019 period. In this vein, the World Bank expected growth in advanced economies to drop from 2.5% in 2022 to 1.5% in 2023 and 1.2% in 2024 and to rebound to 1.6% in 2025. The expected deceleration in economic growth for 2024 comes in light of the slowdown in expected growth in the US, which was partly offset by the slight recovery in the Euro Area’s growth amid the elimination of earlier commodity price shocks. With regards to Emerging Markets & Developing Economies (EMDEs), the World Bank projected growth to somewhat improve from 3.7% in 2022 to 4.0% in 2023 before slightly dropping to 3.9% in 2024 and somewhat recovering to 4.0% in 2025. More specifically, the report expects a better overall growth in EMDE countries having strong credit ratings to levels similar to pre-pandemic average rates. The report noted, however, that despite the fact that growth in EMDE countries with weak credit ratings is expected to improve in 2024 from its 2023 low, the outlook for these countries remains risky amid elevated debt & financing costs. When excluding China, EMDEs GDP growth figures would drop from 4.2% in 2022 to 3.2% in 2023 before rebounding to 3.5% in 2024 and 3.8% in 2025.

On the regional front, the World Bank estimated economic growth in the Middle East & North Africa (MENA) region at 5.8% in 2022, with expectations of a sharp drop in growth to 1.9% in 2023, and a recovery to 3.5% in each of 2024 and 2025. According to the report, the ongoing conflict in the Middle East has increased uncertainty and geopolitical risks in the MENA region. The report has commented that given the possibility that the conflict could intensify, potential benefits to oil exporters from higher oil prices would probably be offset by weakened activity in the region. The conflict has also reduced tourism activity within the region, especially in neighboring countries. The report also stated that the MENA region has suffered from a plethora of obstacles, namely oil production cuts, elevated inflation, and weak private sector activity in oil-importing economies. The World Bank stated that although the non-oil sector in oil-exporting MENA countries was strong, the oil sector drastically weakened due to oil production cuts which tamed growth levels. Accordingly, growth in oil-exporting MENA countries is expected to fall from 6.2% in 2022 to 1.6% in 2023 before recovering to 3.6% in 2024 and 3.5% in 2025. The report also mentioned that growth in oil-importing MENA countries has also slowed down in 2023 reflecting weak private sector activity. In this regard, growth in oil-importing MENA countries is expected to fall from 3.9% in 2022 to 3.0% in 2023 before bouncing back to 3.2% in 2024 and 3.7% in 2025. The report also presumed that in the event the conflict in the Middle East does not escalate, growth in the region should bounce back in 2024 and 2025 as oil-exporting economies take advantage from the undoing of oil production cuts. In parallel, the report revealed that the outlook for oil-importing economies has worsened on the back of weakening domestic conditions.

On a local basis, the World Bank projected Lebanon’s real GDP to have contracted by 7.0% in 2021 and by 0.6% in 2022, projecting economic growth to reach 0.2% in 2023. The report noted that forecasts beyond the year 2023 for Lebanon were removed due to a high degree of uncertainty. According to the World Bank, real growth figures for Lebanon for the year 2022 were revisited from those published in the June 2023 issue of the Global Economic Prospects report at a time when the World Bank had estimated an economic contraction of 2.6% for 2022.