Based on consistent growth in the US, the World Bank revised up its forecast for the world economy on Tuesday, predicting that it will grow by 2.6% this year. (Photo : by Win McNamee/Getty Images)
Based on consistent growth in the U.S., the World Bank revised its forecast for the world economy on Tuesday, predicting that it will grow by 2.6% this year.
Compared to its January forecast of 2.4% growth for 2024, the bank's most recent view represents an increase. It would also coincide with the 2.6% growth in the world economy in 2023.
However, the agency issued a warning that trade restrictions threaten global prosperity, that the poorest nations are struggling due to high interest rates and massive debt, and that global growth is still slow by historical standards. The violent conflicts in Gaza and Ukraine are further straining the economies of the surrounding areas.
Eighty percent of the enhanced prognosis from the World Bank was due to stronger-than-expected growth in the largest economy in the world, the United States. The agency has revised its forecast for the U.S. economy in 2024 to 2.5%, which is up significantly from the bank's January estimate of 1.6% and equal to 2023.
The World Bank, which has 189 member countries, supports emerging economies with grants and low-interest loans to lower poverty and raise living standards.
The U.S. economy grew at the weakest rate in over two years from January to March, 1.3% annually, and Kose said the World Bank prediction factored in the first-quarter slowdown. The decline was mostly caused by two variables that economists believe are transitory: a sharp increase in imports and a decline in company inventories. In contrast, throughout the first three months of the year, the two primary drivers of economic growth-consumer spending and business investment-remained stable.
Resilient Economies Face High Interest Rates
The U.S. and worldwide economies, in particular, have shown remarkable resilience in the face of high interest rates imposed by the Federal Reserve and other central banks to control the high levels of inflation that erupted in 2021.
However, despite the World Bank's upgrade, global growth appears to be slowing down, currently half of the average from 2010 to 2019. Although it has dramatically decreased from 7.2% in 2022 to 4.9% last year and is expected to reach 3.5% in 2024, inflation is still higher than what central banks aim for. This implies that officials at central banks could be hesitant to lower rates from their current high levels.
However, there are also hazards associated with that method, most notably the potential that high borrowing rates would result in an excessive slowdown in economic development.
Several nations are already under pressure. The World Bank projects that the combined growth of developing and emerging market nations will be 4% this year, down from 4.2% in 2023. Because their populations are growing faster than their economies in many cases, their annual income growth per person will only reach 3% from this year through 2026, a far cry from the average 3.8% increase in the ten years before the pandemic.
China, the second-biggest economy in the world behind the US, is having trouble with low consumer confidence and the collapse of its real estate market. It is anticipated that the Chinese GDP will contract from 5.2% in 2023 to 4.8% this year.
Latin America's growth is expected to decrease from 2.2% in the previous year to 1.8% in 2024. Though still small, the World Bank predicts sub-Saharan Africa's economy will grow by 3.5% this year, up from 3% last year.
Due to the fallout from Russia's conflict against Ukraine, the 20 European nations that use the euro are predicted to increase by 0.7% in 2024, a figure that is almost twice as high as their 0.4% growth in 2023.
The World Bank projects that Japan's GDP growth will drop from 1.9% in 2023 to 0.7% this year due to weak consumer spending and faltering exports.
A record number of trade restrictions were implemented by nations last year, partly due to geopolitical concerns, particularly those between the US and China. Volume-wise, global commerce increased by a pitiful 0.1% last year and is expected to grow by an even more pitiful 2.5% in 2024.
The World Bank expresses concern that slowing trade may impede global economic expansion.
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