The bank now projects the U.S. economy to grow by 2.5% in 2024, the same as in 2023 but significantly higher than the 1.6% predicted in January.
The World Bank raised its global economic growth forecast, predicting a 2.6% expansion this year, driven by strong growth in the United States.
This revised outlook is an increase from the 2.4% growth forecast for 2024 made in January, aligning with the 2.6% global expansion in 2023.
However, the agency warned that global growth remains weak compared to past standards, with the poorest countries burdened by heavy debts and high interest rates, and rising trade barriers threatening global prosperity. Additionally, the ongoing conflicts in Ukraine and Gaza are exacerbating pressures on regional economies.
The unexpected strength of the U.S. economy, the largest in the world, is the primary reason for the World Bank’s improved forecast, contributing 80% to the upgrade. The bank now projects the U.S. economy to grow by 2.5% in 2024, the same as in 2023 but significantly higher than the 1.6% predicted in January.
“U.S. growth is exceptional,” said Ayhan Kose, the bank’s deputy chief economist, in an interview with The Associated Press before the release of its Global Economic Prospects report.
Comprising 189 member nations, the World Bank aims to reduce poverty and enhance living standards by providing grants and low-interest loans to developing countries.
In the first quarter of the year, the U.S. economy grew at an annual rate of just 1.3%, the slowest in nearly two years. Kose noted that the World Bank’s forecast accounted for this slowdown, attributing it mainly to a temporary surge in imports and a reduction in business inventories, while core economic drivers like consumer spending and business investment remained strong.
Both the global and U.S. economies have shown surprising resilience against the backdrop of high interest rates set by the Federal Reserve and other central banks to combat the inflation that surged in 2021.
Despite the World Bank’s upgraded forecast, global growth remains sluggish, half a percentage point below the average from 2010 to 2019. While inflation has dropped from 7.2% in 2022 to 4.9% last year and is expected to be 3.5% in 2024, it still exceeds central banks’ targets. Consequently, policymakers may be hesitant to lower rates from their current high levels, which carries the risk of stalling economic growth too much.
“Keeping interest rates high for an extended period has consequences,” Kose said. “It leads to slower growth. We must avoid prolonged slow growth globally.”
He warned that the world could become “stuck in the slow lane.”
Many countries are already feeling the strain. The World Bank projects that emerging markets and developing countries will collectively grow by 4% this year, down from 4.2% in 2023. In many cases, their populations are growing faster than their economies, reducing per capita income growth to 3% this year through 2026, significantly lower than the 3.8% average before the pandemic.
China, the second-largest economy globally, faces challenges from a collapsing real estate market and weak consumer confidence, with growth expected to slow to 4.8% this year from 5.2% in 2023.
In Latin America, growth is forecast to decline from 2.2% last year to 1.8% in 2024. The World Bank expects sub-Saharan Africa’s economy to grow by 3.5%, up from 3% last year.
The eurozone, impacted by Russia’s war in Ukraine, is expected to achieve 0.7% growth in 2024, nearly double the 0.4% growth in 2023.
Japan’s economic growth is projected to slow to 0.7% this year from 1.9% in 2023, due to weak consumer spending and declining exports.
Last year, countries implemented a record number of trade restrictions, partly due to geopolitical tensions, especially between the U.S. and China. Global trade, measured by volume, barely grew by 0.1% last year and is forecast to grow by a modest 2.5% in 2024.
The World Bank expressed concern that declining trade will impede global growth.
“We need to address these issues through dialogue and finding common ground,” Kose said, “rather than by erecting trade barriers.”