The global economy is expected to stabilise for the first time in three years in 2024 – but at a level that is weak by recent historical standards, according to the World Bank’s latest Global Economic Prospects report.
Global growth is projected to remain stable at 2.6 per cent in 2024 before rising to an average of 2.7 per cent in 2025-26, putting it well below the average of 3.1 per cent in the decade before COVID-19. The forecast implies that throughout 2024-26, countries that collectively account for more than 80 per cent of the world’s population and global GDP would still be growing more slowly than in the decade before COVID-19.
Overall, developing economies are expected to grow by an average of 4 per cent in 2024-25, slightly slower than in 2023. Growth in low-income economies is expected to accelerate to 5 per cent in 2024, from 3.8 per cent in 2023. However, growth forecasts for 2024 reflect downgrades in three out of four low-income economies since January. In advanced economies, growth should remain stable at 1.5 per cent in 2024, before rising to 1.7 per cent in 2025.
‘Four years after the upheavals caused by the pandemic, conflicts, inflation and monetary tightening, it seems that global economic growth is stabilising,’ said Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group. “However, growth is at lower levels than before 2020. The outlook for the world’s poorest economies is even more worrying. They face punishing levels of debt servicing, restricted trade possibilities and costly weather events. Developing economies will have to find ways to incentivise private investment, reduce public debt and improve education, health and basic infrastructure. 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.”
This year, according to the World Bank’s Global Economic Prospects, one in four developing economies is expected to remain poorer than they were on the eve of the pandemic in 2019. This proportion is twice as high for countries in fragile situations and affected by conflicts. In addition, the income gap between developing and advanced economies is expected to widen in almost half of developing economies between 2020-24 – the largest share since the 1990s. Per capita income in these economies – an important indicator of living standards – is expected to grow by an average of 3.0 per cent by 2026, well below the average of 3.8 per cent in the decade before COVID-19.
Global inflation is expected to moderate to 3.5 per cent in 2024 and 2.9 per cent in 2025, but the pace of decline is slower than projected just six months ago. Many central banks, as a result, are likely to remain cautious when cutting interest rates. Global interest rates are likely to remain high by the standards of recent decades – averaging around 4 per cent in 2025-26, roughly double the 2000-19 average.
‘While food and energy prices have moderated around the world, underlying inflation remains relatively high – and could stay that way,’ said Ayhan Kose, Deputy Chief Economist at the World Bank and Director of the Outlook Group. “This could lead central banks in major advanced economies to postpone interest rate cuts. A ‘higher for longer’ rate environment would mean tighter global financial conditions and much weaker growth in developing economies.”
Semanário Económico
