Jun 11, 2024 - Economy

The global economy's shift to stability

Animated illustration of a downward trending market trend line that plateaus and then stops, at the edge of the line is the Earth, teetering on the edge.

Illustration: Aïda Amer/Axios

First came the economic shocks, now comes the steadying. The world economy might be stabilizing after years of unprecedented disruption.

Driving the news: The global economy will grow at a rate similar to 2023's, according to the World Bank's latest projections published Tuesday morning.

Why it matters: The group is the latest to update economic forecasts as countries around the world fare better than projected. But inflation, higher rates, trade tensions and geopolitical strife may make the 2020s more sluggish than the prior decade.

What they're saying: "When you look at the headline numbers, you might say, 'Wow, policymakers have cause to celebrate today. We avoided a global recession,'"Ayhan Kose, deputy chief economist at the World Bank, told reporters Monday.

  • "But the bottom line is, policymakers would be wise to keep their eye on the ball. Growth rates remain too slow for progress."

By the numbers: The Bank's economists expect global growth to hold at 2.6% in 2024, an upgrade of 0.2 percentage point from the start of the year.

  • In the next two years, growth is expected to pick up slightly to an average of 2.7%. That is below the 3.1% rate the global economy grew, on average, in the decade before the pandemic.

Slower trade growth might weigh more heavily than in previous years. In a report, the World Bank called the trade outlook "lackluster" and warned that trade barriers were "proliferating at a historic pace."

State of play: The Bank expects global inflation to recede more slowly than previously thought, averaging 3.5% this year. In turn, the economists says the extent of expected rate cuts has moderated.

  • "This is a major risk confronting the global economy — interest rates remaining higher for longer and [an] already weak world outlook becoming even weaker," Kose said.

The intrigue: To a large extent, rosier forecasts for the U.S. economy —despite high rates — explain the World Bank's overall upgrade. U.S. economic growth is predicted to be 2.5% this year — almost a full percentage point above that projected just six months ago.

The outlook is more dour for poorer nations. The World Bank slashed growth expectations among low-income countries, though growth will still be faster than in 2023.

  • Per capita income in developing economies is expected to grow by 3%, on average through 2026 — below the 3.8% seen in the late 2010s.

The bottom line: By 2026, the World Bank says countries home to 80% of the global population will experience slower economic growth than the decade before COVID-19.

  • "For the average person, things are going to feel worse than what it used to be prior to the pandemic when it comes to growth of income," Kose said.
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