The World Bank has increased its forecast for global economic growth this year, projecting a steady 2.6% growth rate. The bank also predicts a slight increase in output to 2.7% in 2025. However, it warns that the rise of new trade barriers and protectionist policies pose a long-term threat to global growth.
The global economy has been stabilizing after facing challenges from the pandemic, conflicts, and inflation in recent years. Advanced economies are growing at an annual rate of 1.5%, with Europe and Japan experiencing sluggish output. On the other hand, emerging market and developing economies, led by China and Indonesia, are growing at a rate of 4%.
Although the outlook for growth is more positive, the World Bank notes that prices are easing more slowly than anticipated. It expects global inflation to moderate to 3.5% in 2024 and 2.9% next year. This gradual decline may lead central banks to postpone interest rate cuts, impacting growth in developing economies.
Despite the improved outlook, there are significant uncertainties that could affect the global economy. Ongoing conflicts, such as Russia's war in Ukraine and the potential for a wider regional conflict between Israel and Hamas in Gaza, add to the uncertainty. Trade tensions between the United States and China are also intensifying, potentially causing volatility in international commerce.
The World Bank highlights the increase in "trade distorting policies" since the pandemic, such as tariffs and subsidies. These measures can disrupt supply chains and make them less efficient. The bank warns that further proliferation of trade restrictions could have adverse effects on global growth prospects.
