Monthly Briefing on the World Economic Situation and Prospects

Given the strong interactions between domestic debt and the broader economy, policymakers must carefully weigh its associated trade-offs while determining the optimal debt structure to minimize chances of domestic debt default.

Regional integration in West African economies faces further challenges as Burkina Faso, Mali, and Niger announced the intention to withdraw from the Economic Community of West African States (ECOWAS).

A prolonged period of high borrowing costs and tight credit conditions could exacerbate balance-of-payment pressures and debt sustainability concerns in many low-income and vulnerable economies.

Industrial and innovation policies are gaining additional traction, becoming crucial aspects of many governments’ toolkits to support innovation, build resilience, and accelerate the green energy transition. There are, however, enormous disparities across economies in their capacity to implement industrial policies, particularly those to support science, technology and innovation.

Despite persistent monetary tightening by major central banks, labour market conditions in most developed economies remained robust in 2023. Low unemployment and high economic activity are accompanied with continuing, albeit moderating, labour shortages.

A massive gap in investment and the adoption of low-carbon technologies between the developed and developing countries persist, threatening the urgent need to accelerate the energy transition as well as the achievement of the SDGs.

Higher domestic food prices are a major driver of food insecurity, especially for poor households whose incomes are stagnant or declining. Countries that already faced protracted food crises before the COVID-19 pandemic and the war in Ukraine have been the most affected by the recent food price increases.

Microchips are central to modern industries, ranging from consumer goods, industrial production to national defence. While chip supply shortages, notable during the pandemic, have now largely eased, this has been uneven across user sectors.

Medium-term growth prospects are clouded by scarring from the pandemic, the ever-worsening impact of climate change, and structural macroeconomic challenges, such as anaemic investment and mounting debt vulnerabilities.