The World Bank raised its outlook for the current year, saying that a strong U.S. economy will help lift the global growth rate to 2.6%, up from a previous estimate of 2.4% and matching the growth level achieved in 2023. Growth is projected to edge higher in 2025, rising to a 2.7% rate.
In a forward to the updated 2024 outlook, World Bank chief economist Indermit Gill said global economic growth is holding steady this year following a three-year decline, with inflation hitting a three-year low and financial conditions improving. “The world economy, in short, appears to be in final approach for a ‘soft landing,’” he wrote.
Gill called out the U.S. economy for showing “impressive resilience,” despite the tighter monetary conditions imposed by the Federal Reserve in its effort to control inflation. “U.S. dynamism, in fact, is one reason the global economy enjoys some upside potential over the next two years,” he said.
U.S. growth is projected to come in at 2.5% this year, easing to 1.8% in 2025. The estimate for 2024 has been raised by 0.9 percentage points, based in part on stronger-than-expected consumer spending. The projected slowdown next year is driven by tighter monetary conditions, slower spending growth and falling savings.
Other countries doing exceptionally well include India and Indonesia. The World Bank expects the Indian economy to grow at a rate of 6.7% per year for the next three years, driven by strong domestic demand and investment. With a growing middle class, Indonesia is projected to grow at a rate of 5.1% per year for the next two years.
At the same time, the bank cautioned that some developing economies have not fully recovered from the pandemic. “By the end of this year, one in four developing economies will be poorer than it was on the eve of the pandemic,” Gill said. “By 2026, countries that are home to more than 80 percent of the world’s population would still be growing more slowly, on average, than they were in the decade before COVID-19.”
Gill called on nations to maintain policies that promote productivity and innovation, and to work together to raise growth rates. Increasing trade barriers could hinder that effort, and threaten to widen the gap between developing and nations.
Ayhan Kose, deputy chief economist at the World Bank, told the Associated Press that a reduction in trade driven by political tensions could act as a major brake on global growth. “The world might become stuck in the slow lane,” he said.
