Global growth to stay steady at 2.6% in 2024 for the first time in three years

This is still below the 3.1% average in the decade before the coronavirus, World Bank says

A cargo ship moves from the Francis Scott Key Bridge to the Seagirt Marine Terminal at the Port of Baltimore in the US. The World economy is expected to be driven by moderate increases in trade and investment in the coming years. Reuters
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The world economy is expected to grow by 2.6 per cent this year, and the expansion rate is expected to remain consistent throughout the year, without significant fluctuations, according to a report by the World Bank.

It will be the first time in three years that the global growth rate will stay steady despite escalating geopolitical tensions and high interest rates. Following this, growth is anticipated to rise slightly to 2.7 per cent in 2025-2026, driven by moderate increases in trade and investment, the report said.

The World Bank's latest growth outlook is a slight upgrade from its January projections of 2.4 per cent. However, this growth rate is still below the 3.1 per cent average in the decade before the coronavirus pandemic.

The latest forecast implies that over the course of 2024-2026 countries that collectively account for more than 80 per cent of the world’s population and global economy would still be growing more slowly than they did in the decade before the pandemic.

“Four years after the upheavals caused by the pandemic, conflicts, inflation, and monetary tightening, it appears that global economic growth is steadying. However, growth is at lower levels than before 2020,” said Indermit Gill, World Bank’s chief economist and senior vice president.

Overall, developing economies are projected to grow 4 per cent on average over 2024-2025, slightly slower than in 2023. Growth in low-income economies is expected to increase to 5 per cent this year from 3.8 per cent in 2023.

Developing economies still lag behind

In 2024, one in four developing economies is expected to remain poorer than it was before the pandemic began in 2019. This proportion is twice as high for countries in fragile and conflict affected situations.

Prospects for the world’s poorest economies are even “more worrisome” as they face higher levels of debt service, constricting trade possibilities and costly climate events, said Mr Gill.

“Developing economies will have to find ways to encourage private investment, reduce public debt, and improve education, health, and basic infrastructure.”

The poorest among them, particularly the 75 countries that qualify for concessional aid from the International Development Association, will be unable to achieve this without international assistance, Mr Gill said.

Middle East and GCC bound to grow in 2024

After slowing to 1.5 per cent last year, growth in the Middle East and North Africa region is expected to jump to 2.8 per cent in 2024 and 4.2 per cent in 2025, mainly because of a gradual resumption of oil production.

This month, Opec+ bloc, responsible for supplying about 40 per cent of the world's crude oil, agreed to extend its output cuts of 3.66 million barrels per day, originally set to conclude this year, until the end of 2025.

Meanwhile, the additional 2.2 million bpd voluntary production cuts of eight Opec+ member states were extended by three months until the end of September. The group also released a plan for gradually unwinding the voluntary curbs on a monthly basis from October 2024 until September 2025.

Mena’s 2024 growth outlook has weakened since January, “partly reflecting extensions of additional voluntary oil production cuts and the continuing conflict in the Middle East centred in Gaza”, the report said.

Some of the key downside risks in the region include an escalation of “armed conflicts, heightened local violence and social tensions, a sudden tightening in global financial conditions, more frequent or severe natural disasters, and weaker-than-projected growth in China”.

Meanwhile, growth in GCC countries is forecast to strengthen to 2.8 per cent in 2024 and 4.7 per cent in 2025.

Among oil exporters, declines in oil production have constrained oil activity across GCC countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. However, growth in non-oil activity has remained robust, driven by both private consumption and business investment, somewhat offsetting a contraction of oil activity, the report said.

Global inflation decline slower than expected

The report indicated that while global inflation is projected to decrease, the rate at which it will decrease is slower than earlier forecasts had suggested. It is expected to average 3.5 per cent this year and 2.9 per cent in 2025, but the pace of decline is slower than was projected six months ago.

“Although food and energy prices have moderated across the world, core inflation remains relatively high … and could stay that way,” said Ayhan Kose, World Bank’s deputy chief economist and director of prospects group.

“That could prompt central banks in major advanced economies to delay interest rate cuts. An environment of higher-for-longer rates would mean tighter global financial conditions and much weaker growth in developing economies.”

Global interest rates are likely to remain high by the standards of recent decades – averaging about 4 per cent over 2025-2026, roughly double the 2000-2019 average, the report said.

Updated: June 11, 2024, 1:38 PM