The World Bank has released its long awaited Global Economic Prospects report for 2024-25. The Global Economic Prospects report provides a comprehensive analysis of the global economy’s current state and future trajectory.
The report projects a steady global growth rate of 2.6 percent for this year, despite the geopolitical tensions and high interest rates that have been prevalent. This growth rate is expected to edge up to 2.7 percent in 2025-26, accompanied by modest expansions of trade and investment.
However, the outlook remains subdued. The report indicates that growth is set to underperform its 2010s average in nearly 60 percent of economies, representing more than 80 percent of global output and population. This suggests that the majority of the world’s economies are still struggling to recover from the economic shocks of the past decade.
Global inflation is another key area of concern. It is projected to moderate at a slower pace than previously assumed, averaging 3.5 percent this year. This reflects the continued inflationary pressures that many economies are facing. As a result, central banks are likely to remain cautious in easing policy, further complicating the economic recovery process.
The report also highlights the challenges faced by Emerging Market and Developing Economies (EMDEs). The shocks of recent years have impeded per capita income catch-up, with almost half of EMDEs losing ground relative to advanced economies over 2020-24. Amid elevated levels of conflict, prospects remain especially lackluster in many vulnerable economies.
The risks to the global economy have become somewhat more balanced, but downside risks still predominate. These include geopolitical tensions, trade fragmentation, higher-for-longer interest rates amid persistent inflation, and climate-change-related natural disasters. These risks pose significant challenges to the global economy and require concerted efforts to mitigate.
The report emphasizes the need for global policy efforts to safeguard trade, support green and digital transitions, deliver debt relief, and improve food security. These measures are crucial for ensuring sustainable and inclusive growth in the global economy.
High debt and elevated debt-servicing costs pose significant challenges for EMDE policy makers. They will need to balance sizable investment needs with fiscal sustainability. This will require careful fiscal management and the implementation of policies that promote economic growth without exacerbating debt burdens.
Finally, the report underscores the importance of implementing policies to raise productivity growth, improve public investment efficiency, build human capital, and close labor market gender gaps. These measures are essential for meeting development goals and ensuring a sustainable and inclusive global economy.
In conclusion, the World Bank’s Global Economic Prospects report provides a sobering yet insightful analysis of the global economy’s current state and future prospects. It underscores the challenges that lie ahead and the policy measures needed to overcome them. As we navigate through these uncertain times, the insights provided by this report will be invaluable in guiding our efforts towards achieving sustainable and inclusive growth.
