The World Bank on Tuesday raised its outlook for the global economy this year, but warned that the rise of new trade barriers and protectionist policies posed a long-term threat to global growth.
In its latest Global Economic Outlook report, the World Bank expects global growth to hold steady at 2.6% this year, an improvement from its January forecast of 2.4%, and forecasts that output will slightly increase to 2.7% in 2025. Forecasts show the global economy stabilizing after being shaken in recent years by the pandemic and wars in Ukraine and the Middle East.
“Four years after the upheaval caused by the pandemic, conflict, inflation and monetary tightening, it appears that global economic growth is stabilizing,” said Indermit Gill, chief economist of the World Bank, in an accompanying statement The report.
However, sluggish growth continues to haunt the world’s poorest economies, which are still struggling with inflation and the burden of high debt. The bank noted that over the next three years, countries that represent more than 80% of the world’s population would experience slower growth than in the decade before the pandemic.
These slightly more optimistic forecasts are explained by the resilience of the US economy, which continues to defy expectations despite rising interest rates. Overall, advanced economies are growing 1.5 percent annually, with output remaining sluggish in Europe and Japan. In contrast, emerging and developing economies are growing at 4%, led by China and Indonesia.
Although growth is expected to be a little stronger than expected, the World Bank said prices were falling more slowly than it had forecast six months ago. It forecasts global inflation to moderate to 3.5% in 2024 and 2.9% next year. This gradual decline will likely lead central banks to delay cutting interest rates, weakening growth prospects in developing economies.
Despite the improving outlook, the global economy still faces significant uncertainty linked to Russia’s war in Ukraine and the possibility that the war between Israel and Hamas in Gaza could escalate into a larger regional conflict.
Trade tensions between the world’s two largest economies – the United States and China – are also escalating and could make international trade more volatile. The Biden administration imposed drastic new tariffs on Chinese electric vehicles last month and maintained tariffs on Chinese imports that the Trump administration had imposed. The European Union is also considering new taxes on Chinese green energy technologies as concerns grow over the country’s excess industrial capacity.
The World Bank noted that “trade-distorting policies” such as tariffs and subsidies had increased sharply since the pandemic. He warned that such measures tended to distort supply chains, making them less efficient as trade was diverted to other countries to avoid import duties.
“A further proliferation of trade restrictions poses a substantial downside risk to the global growth outlook,” the report said. “Increased trade policy uncertainty and a further weakening of the multilateral trading system – both of which could result from the escalation of restrictive trade measures – could have negative effects on growth. »
