The World Bank on Tuesday raised its outlook for the global economy this year, but warned that the emergence of new trade barriers and protectionist measures pose a long-term threat to global growth.
In its latest Global Economic Prospects report, the World Bank forecast that global growth will remain stable at 2.6 percent this year, an increase from its January forecast of 2.4 percent, and forecast that output in the year will rise slightly to 2.7 percent in 2025. The global economy is stabilizing after being shaken in recent years by the pandemic and the wars in Ukraine and the Middle East.
“Four years after the turmoil caused by the pandemic, conflict, inflation and monetary tightening, global economic growth appears to be stabilizing,” World Bank chief economist Indermit Gill said in a statement accompanying the report.
However, sluggish growth continues to plague the world’s poorest economies, still struggling with inflation and the burdens of high debt. The bank noted that countries representing more than 80 percent of the world’s population would see slower growth in the next three years than in the decade before the pandemic.
The decisive factor for the slightly better forecast was the resilience of the US economy, which continues to fall short of expectations despite higher interest rates. Overall, advanced economies are growing at an annual rate of 1.5 percent, while production in Europe and Japan remains sluggish. In contrast, emerging and developing countries are growing at a rate of 4 percent, led by China and Indonesia.
Although growth is expected to be slightly stronger than previously forecast, the World Bank said prices are falling more slowly than forecast six months ago. It expects global inflation to moderate to 3.5 percent in 2024 and to 2.9 percent next year. This gradual decline is likely to prompt central banks to delay interest rate cuts, which will cloud growth prospects in developing countries.
Despite the improved outlook, the global economy continues to face significant uncertainty due to Russia’s war in Ukraine and the possibility that the war between Israel and Hamas in Gaza could develop into a widespread regional conflict.
Trade tensions between the world’s two largest economies – the United States and China – are also heating up and could make international trade more volatile. The Biden administration last month imposed sweeping new tariffs on Chinese electric vehicles, maintaining tariffs on Chinese imports imposed by the Trump administration. The European Union is also considering new levies on Chinese green energy technology as concerns grow over the country’s excess industrial capacity.
The World Bank noted that “trade-distorting measures” such as tariffs and subsidies have increased sharply since the pandemic. It warned that such measures tend to distort supply chains and make them less efficient as trade shifts to other countries to avoid import tariffs.
“Further expansion of trade restrictions poses significant downside risk to global growth prospects,” the report said. “Increased trade policy uncertainty and a further weakening of the multilateral trading system – both of which could be a result of increasing trade restriction measures – could have a negative impact on growth.”
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2024-06-11 13:30:07
www.nytimes.com
