July 11, 2024

World Bank’s Optimistic Forecast: Can the US Drive Global Growth to 2.6%?

A Surprising Upgrade
In a recent report, the World Bank upgraded its global economic growth forecast for 2024, predicting an expansion of 2.6%, up from the previously projected 2.4%. This revision aligns with the global economy's performance in 2023. The primary driver? The unexpectedly strong growth in the United States.
Image Credits: AP Photo/ Charlie Riedel

A Surprising Upgrade

In a recent report, the World Bank upgraded its global economic growth forecast for 2024, predicting an expansion of 2.6%, up from the previously projected 2.4%. This revision aligns with the global economy’s performance in 2023. The primary driver? The unexpectedly strong growth in the United States.

US Economy: The Powerhouse Behind the Numbers

The World Bank credits the US for 80% of the upgraded forecast. It expects the US economy to grow by 2.5% in 2024, a significant leap from the 1.6% projected in January. “US growth is exceptional,” said Ayhan Kose, the bank’s deputy chief economist.

Global Growth: Still Below Pre-Pandemic Standards

Despite the positive outlook, the World Bank cautions that global growth remains sluggish by historical standards. The forecasted growth rate is half a percentage point below the 2010-2019 average. Emerging markets and developing countries are expected to grow collectively by 4% this year, down from 4.2% in 2023, highlighting ongoing economic struggles in many regions.

Challenges Ahead: Debt, High Interest Rates, and Geopolitical Tensions

The global economy faces significant hurdles, including high levels of debt, elevated interest rates, and increasing trade barriers. Additionally, geopolitical conflicts, such as the wars in Ukraine and Gaza, are exerting pressure on regional economies. Kose warned, “The world might become stuck in the slow lane.”

Sector-Specific Insights

  • China: The world’s second-largest economy is grappling with a real estate market collapse and weak consumer confidence. Growth is expected to slow to 4.8% from 5.2% in 2023.
  • Latin America: Growth is forecast to decelerate from 2.2% to 1.8% in 2024.
  • Sub-Saharan Africa: Modest growth of 3.5% is expected, up from 3% last year.
  • Eurozone: The 20 European countries sharing the euro are projected to grow by 0.7% in 2024, up from 0.4% in 2023.
  • Japan: Economic growth is expected to slow to 0.7% from 1.9% in 2023, hindered by sluggish consumer spending and declining exports.

Trade and Inflation: Lingering Concerns

Global trade saw a minimal increase of 0.1% last year and is forecasted to grow by a modest 2.5% in 2024. The World Bank remains concerned about the impact of faltering trade on global growth. Inflation, while cooling from 7.2% in 2022 to a forecasted 3.5% in 2024, remains higher than desired, posing a challenge for central banks.

Conclusion: A Cautious Optimism

The World Bank’s revised forecast underscores the global economy’s resilience, particularly the US’s, amidst numerous challenges. However, it also highlights the need to carefully navigate risks associated with high interest rates and trade barriers. As Kose noted, “We need to avoid lower-for-longer economic growth around the world.” The path ahead requires balancing optimism with prudence to ensure sustained global growth.

Share the Post:

Related Posts