The World Bank raised its outlook for this year, saying the strong U.S. economy would push global growth to 2.6% from 2.4% previously expected, matching the level of growth achieved in 2023. In 2025, it will rise further to 2.7%.
World Bank Chief Economist Indermit Gill said in his latest outlook for 2024, global economic growth is expected to continue for three years, with inflation reaching a three-year low and financial conditions improving. After a period of slump, it has stabilized this year, he said. “In short, the global economy appears to be in the final stages of a ‘soft landing,'” he wrote.
Gill praised the U.S. economy for its “impressive resilience” despite monetary tightening imposed by the Federal Reserve to curb inflation. “In fact, the dynamism of the United States is one of the reasons why the global economy enjoys some upside potential over the next two years,” he said.
U.S. growth is expected to be 2.5% this year, slowing to 1.8% in 2025. The forecast for 2024 was raised by 0.9 percentage points, partly because personal consumption exceeded expectations. The economic slowdown expected next year will be caused by tighter financial conditions, slower spending growth and lower savings.
Other countries that are doing particularly well include India and Indonesia. The World Bank expects India’s economy to grow at an annual rate of 6.7% over the next three years, driven by strong domestic demand and investment. With the growth of the middle class, Indonesia is expected to grow at an annual rate of 5.1% over the next two years.
At the same time, the bank warned that some developing countries have not fully recovered from the pandemic. “By the end of this year, one in four developing countries will be poorer than they were on the eve of the pandemic,” Gill said. “By 2026, countries that are home to more than 80 per cent of the world’s population will, on average, grow more slowly than they did in the pre-COVID-19 decade.”
Mr. Gill called on countries to maintain policies that promote productivity and innovation, and to work together to increase growth rates. Increasing trade barriers could hamper those efforts and widen the gap with developing countries.
Ayhan Kose, deputy chief economist at the World Bank, told The Associated Press that a decline in trade due to political tensions could be a major brake on global economic growth. “The world may be stuck in the slow lane,” he says.
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