Global economic growth is projected to hold steady at 2.6 percent in 2024 before edging up to an average of 2.7 percent in 2025-26, a new World Bank report said on Tuesday.
This growth is, however, well below the 3.1 percent average in the decade before Covid-19.
Therefore, while the global economy is expected to stabilize for the first time in three years in 2024, it will be at a level that is weak by recent historical standards, the World Bank’s latest ‘Global Economic Prospects’ report said.
Slower growth
The forecast implies that, over the course of 2024-26, countries that collectively account for more than 80 percent of the world’s population and global GDP would still be growing more slowly than they did in the decade before Covid-19.
Overall, developing economies are projected to grow 4 percent on average over 2024-25, slightly slower than in 2023. Growth in low-income economies is expected to accelerate to 5 percent in 2024 from 3.8 percent in 2023. More importantly, the forecasts for 2024 growth reflect downgrades in three out of every four low-income economies since January.
In advanced economies, growth is set to remain steady at 1.5 percent in 2024 before rising to 1.7 percent in 2025.
Punishing levels of debt
“Four years after the upheavals caused by the pandemic, conflicts, inflation and monetary tightening, it appears that global economic growth is steadying,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president.
“However, growth is at lower levels than before 2020. Prospects for the world’s poorest economies are even more worrisome. They face punishing levels of debt service, constricting trade possibilities, and costly climate events. Developing economies will have to find ways to encourage private investment, reduce public debt, and improve education, health, and basic infrastructure,” he added.
“The poorest among them — especially the 75 countries eligible for concessional assistance from the International Development Association — will not be able to do this without international support,” Gill said.
A widening gap
This year, one in four developing economies is expected to remain poorer than it was on the eve of the pandemic in 2019. This proportion is twice as high for countries in fragile- and conflict-affected situations, the World Bank said.
Moreover, the income gap between developing economies and advanced economies is set to widen in nearly half of developing economies over 2020-24 — the highest share since the 1990s. Per capita income in these economies — an important indicator of living standards — is expected to grow by 3 percent on average through 2026, well below the average of 3.8 percent in the decade before COVID-19.
Global inflation to slow
Global inflation is likely to moderate to 3.5 percent in 2024 and 2.9 percent in 2025, but the pace of decline is slower than was projected just six months ago. Many central banks, as a result, are likely to remain cautious in lowering policy interest rates. Global interest rates are likely to remain high by the standards of recent decades — averaging about 4 percent over 2025-26, roughly double the 2000-19 average.
“Although food and energy prices have moderated across the world, core inflation remains relatively high — and could stay that way,” said Ayhan Kose, the World Bank’s deputy chief economist and director of the Prospects Group. “That could prompt central banks in major advanced economies to delay interest-rate cuts. An environment of ‘higher-for-longer’ rates would mean tighter global financial conditions and much weaker growth in developing economies.”
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