Having slowed for three consecutive years, global economic growth is expected to stabilise this year despite “flaring geopolitical tensions” and high interest rates, the World Bank has said.
In its latest Global Economic Assessment report, the Washington-based institution said inflation had been cut to a three-year low and financial conditions had “brightened” as a result.
“The world economy, in short, appears to be in final approach for a soft landing,” the bank’s chief economist Indermit Gill said in the foreword to the report.
The bank, however, warned there were a number of risks to the outlook including the possibility that “escalating geopolitical tensions” could trigger another commodity price shock.
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It also cautioned that further trade fragmentation risks additional disruptions to trade while “the persistence of inflation could lead to delays in monetary easing”.
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According to the World Bank, global growth will hold steady at 2.6 per cent this year before edging up to an average of 2.7 per cent in 2025-2026. That, however, was well below the 3.1 per cent average in the decade before Covid-19, it said.
The bank said its forecast implies that over the course of the next three years, countries that collectively account for more than 80 per cent of the world’s population and global gross domestic product “would still be growing more slowly than they did in the decade before Covid-19″.
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Developing economies are projected to grow 4 per cent on average over 2024-2025, slightly slower than in 2023, while growth in low-income economies is expected to accelerate to 5 per cent in 2024 from 3.8 per cent in 2023.
However, the bank noted that the forecasts for 2024 growth reflect downgrades in three out of every four low-income economies since January.
“Four years after the upheavals caused by the pandemic, conflicts, inflation and monetary tightening, it appears that global economic growth is steadying,” Mr Gill said.
“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,” he said.
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In its report, the World Bank noted that one in four developing economies would likely be poorer than they were on the eve of the pandemic in 2019.
This proportion is twice as high for countries in fragile and conflict-affected situations, it said, while noting the income gap between developing economies and advanced economies was set to widen in nearly half of developing economies, the highest share since the 1990s.
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