Heaptalk, Jakarta — The World Bank revealed that global economic growth is projected to hold steady at 2.6% in 2024 before increasing to an average of 2.7% in 2025 – 2026. The forecast implies that 2024 – 2026, countries that collectively account for more than 90% of the world’s population and global GDP will still be growing more slowly than before the pandemic.
Overall, World Bank observed the developing economies are predicted to enhance 4% on average over 2024 – 2025. The progress in low-income countries is expected to bump to 5% this year. However, this year’s estimation growth reflect downgrades in three out of every four low-income economies since January. While in advanced economies, growth is set to remain steady at 1.5% this year.
“Four years after the upheavals caused by the pandemic, conflicts, inflation, and monetary tightening, the global economy performance remain steady. However, growth is at lower levels than before 2020. Prospects for the world’s poorest economies are even more worrisome,” the World Bank Group’s Chief Economist and Senior Vice President, Indermit Gill, conveyed.
Global inflation is expected to moderate to 3.5% in 2024 and 2.9% in 2025, but the pace of decline is slower than was projected just six months ago. As a result, many central banks will remain cautious in lowering policy interest rates. Meanwhile, global interest rates are likely to remain high by the standards of recent decades, averaging about 4% over 2025 – 2026.
“Although food and energy prices have moderated across the world, core inflation remains relatively high and could stay that way. That could prompt central banks in major advanced economies to delay interest-rate cuts. An environment of higher-for-longer rates would mean tighter global financial conditions and much weaker growth in developing economies,” the World Bank’s Deputy Chief Economist and Director of Prospects Group, Ayhan Kose, affirmed.
Harnessing public investment to boost global economy
World Bank disclosed that public investment performance in developing economies has halved since the global financial crisis, dropping to annual average of 5% in the past decade. Yet, public investment can be a powerful policy lever. For developing economies with ample fiscal space and efficient government spending practices, scaling up public investment by 1% of GDP can increase the level of output by up to 1.6% over the medium term.
To maximize the impact of public investment, emerging market and developing economies should undertake wide-ranging policy reforms to improve public investment efficiency, such as governance and fiscal administration reinforcement and fiscal space establishment through revenue and expenditure measures. According to the World Bank, the global community can play an essential role in facilitating these reforms, particularly in lower-income developing countries through financial support and technical assistance.
