The World Bank raised its forecast for global growth this year on strong US expansion, while warning that climate change, wars and high debt will hurt the poorer countries where most of the world’s population lives.
The bank boosted its projection to 2.6% from a 2.4% forecast in January, according to the Global Economic Prospects report released on Tuesday. The Washington-based anti-poverty lender kept its 2025 forecast unchanged at 2.7%.
Most of the improvement stems from the World Bank upgrading the US growth outlook to 2.5% from a previous estimate of 1.6%. But countries in Sub-Saharan Africa, the Middle East and North Africa saw their estimates cut.
World Bank Boosts 2024 Growth Forecast | Global GDP set to expand more than projected at start of the year
“The good news is that the global economy is stabilizing, and doing so faster than we expected back in January, and in good part this is because of the unexpected strength of the US economy,” said Indermit Gill, the bank’s chief economist. But the growth path now is lower than it was before the coronavirus pandemic, and “for the smallest and poorest economies, things are not looking good either in terms of stability or growth,” Gill said.
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The global inflation rate is expected to drop to 3.5% this year and 2.9% in 2025, but to fall more slowly than projected in January. That means that many central banks are likely to remain cautious about cutting interest rates, which will probably remain high by pre-pandemic standards, averaging about 4% in 2025 to 2026.
World Bank Boosts Growth Outlook for 2024 | US expansion helping lift global forecast.
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Gill flagged the challenges that developing economies face as they try to attract private investment, reduce public debt and improve education, health and basic infrastructure, as well as deal with conflict and climate shocks. The 75 nations that qualify for interest-free lending from the World Bank’s International Development Association will need international support, he said.
The bank also highlighted the risks that countries face from weak global trade. While trade growth will pick up a bit this year from a standstill last year, the World Bank forecasts that 2024 will cap the worst half decade of growth for trade since the 1990s.
“The trade outlook remains lacklustre compared to recent decades, partly reflecting a proliferation of trade-restrictive measures and elevated trade policy uncertainty,” the World Bank said.
