By Bahle Gama
The World Bank has reported that it expects the global economy to stabilise for the first time in three years, but at a level that is still weak by historical standards.
In its June 2024 Global Economic Prospects report, the Bank projected that global growth would reach 2.6 per cent this year and 2.7 per cent in 2025 and 2026 respectively, compared to the 3.1 per cent average in the decade before the Covid-19 pandemic.
This implies that countries that collectively account for more than 80 per cent of the world’s population and global GDP will be growing slowly compared to the 10 years before the pandemic in 2020.
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The Bank stated that developing economies are to grow by 4 per cent over 2024 and 2025 respectively, which is slightly lower than in 2023, and by 5 per cent in low-income economies, compared with 3.8 per cent in 2023.
In advanced economies, growth is set to remain steady at 1.5 per cent this year before rising to 1.7 per cent in 2025.
However, 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, one in four developing economies is expected to remain poorer than it was on the eve of the pandemic in 2019. This proportion is twice as high for countries in fragile, and conflict-affected situations.
Moreover, the income gap between developing economies and advanced economies is set to widen in nearly half of developing economies over 2020 to 2024 the highest share since the 1990s,” said the Bank.
World Bank reports that per capita income in these economies, which is an important indicator of living standards, is expected to grow by 3 per cent on average through to 2026, well below the average of 3.8 per cent in the decade before Covid-19.
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Global inflation is expected to moderate to 3.5 per cent this year and 2.9 in 2025, but the pace of decline is slower than was projected six months ago.
Many central banks, as a result, are expected to remain cautious in lowering interest rates.
The World Bank further reports that global interest rates are likely to remain high by the standards of recent decades, averaging about 4 per cent over 2025 and 2026, which is nearly double the 2000 to 2019 average.
According to World Bank Chief Economist and Senior VP Indermit Gill, it appears that global economic growth is steadying, four years after the upheavals caused by the pandemic, conflicts, and monetary tightening.
“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.
“Developing economies will have to find ways to encourage private investment, reduce public debt, and improve education, health, and basic infrastructure,” Gill said.
