The World Bank anticipates a steadying in global economic growth this year, having witnessed a decline for three straight years. Despite intense geopolitical tensions and high interest rates, the financial situation has been boosted by a reduction in inflation.
The Washington-based organisation, in its latest Global Economic Assessment report, explains that inflation has reached a historic low in three years. This optimistic outlook, however, faces several potential hazards. These include a possible price surge triggered by escalating geopolitical situations and increased trade disruptions due to further trade segmentation.
The World Bank also suggested caution around the potential impacts of persisting inflation leading to postponement in monetary easing. US presidential candidate Donald Trump’s plans to surround the US economy with tariff barriers hints towards the potential problems, proposing a universal duty of 10% on all US imports.
Moreover, the World Bank predicts the global growth rate will maintain a steady 2.6% this year, marginally increasing to 2.7% on average in 2025-26. This, however, pales in comparison to the average growth rate of 3.1% recorded in the decade prior to the Covid-19 pandemic.
This forecast indicates that over the next three years, countries accounting for over 80% of the world’s population and GDP will still be growing at a lower rate than they were in the pre-Covid-19 era.
The forecast predicts a 4% growth rate on average for developing economies for 2024-25, a slight decrease from 2023, while growth in low-income economies is expected to surge from 3.8% in 2023 to 5% in 2024. However, the World Bank acknowledges a downgrade in the growth forecasts for 2024 in three out of every four low-income economies since the start of the year.
“Global economic stability seems to be reinstating four years post the tumult induced by the pandemic, wars, inflation and fiscal tightening,” stated Mr Gill.
“Nevertheless, growth rates are subdued in comparison to pre-2020 years. The outlook for the most underprivileged economies globally is considerably more concerning. They grapple with onerous debt service obligations, tightly restricted trade options, and expensive climatic phenomena,” he added.
In their report, the World Bank indicated that a quarter of developing economies are forecasted to be in worse economic circumstances compared to pre-pandemic times in 2019.
This ratio is duplicated for nations enveloped in fragility and conflicts. It highlighted the growing income disparity between developing and developed nations, expected to escalate in nearly half of the developing nations – the largest proportion since the 90s.