Home Headlines Global Economy Stabilizes, but Growth Remains Below Pre-COVID Levels

Global Economy Stabilizes, but Growth Remains Below Pre-COVID Levels

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Global Economy
Global Economy

The World Bank’s latest Global Economic Prospects report indicates that the global economy is projected to stabilize for the first time in three years, with growth expected to reach 2.6% in 2024 before increasing to an average of 2.7% in 2025-26.

However, this growth is weaker compared to the 3.1% average seen in the decade before the COVID-19 pandemic.

Developing economies are forecasted to grow by 4% on average over the next two years, slightly slower than in 2023. Low-income economies are expected to accelerate to 5% growth in 2024, but this outlook has been downgraded for three-quarters of these economies since January. Advanced economies are set to maintain steady growth at 1.5% in 2024, rising to 1.7% in 2025.

The report highlights the challenges faced by developing economies, especially the poorest among them, including high levels of debt, limited trade opportunities, and costly climate events. These economies will need to focus on encouraging private investment, reducing public debt, and improving education, health, and infrastructure. International support will be crucial, particularly for the 75 countries eligible for concessional assistance from the International Development Association.

Despite the projected stabilization, one in four developing economies is expected to remain poorer than pre-pandemic levels in 2019, with the income gap between developing and advanced economies widening in nearly half of developing countries. Global inflation is expected to moderate, but core inflation remains relatively high, which could prompt major central banks to delay interest rate cuts.

The report also features two analytical chapters, one on using public investment to accelerate private investment and promote economic growth, and another on addressing the chronic fiscal difficulties faced by small states. Comprehensive reforms are needed to improve fiscal sustainability in small states, including revenue diversification, improved spending efficiency, and better management of natural disaster risks.

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