Global Economy Growing Steadily, But Not Fast Enough To Ease Poverty: World Bank

Washington: The global economy is growing steadily despite conflicts, protectionist trade policies, and high interest rates but not rapidly enough to ease poverty, the World Bank stated in its latest global economic assessment on Thursday. The bank projects global economic growth at 2.7 per cent in both 2025 and 2026, matching the rates for 2023 and 2024 but falling 0.4 percentage points below the 2010-2019 average. This sluggish growth reflects ongoing challenges from recent crises, including COVID-19 and Russia's invasion of Ukraine.

The World Bank's latest Global Economic Prospects report, released biannually in January and June, offered some positive news, noting that global inflation, which peaked above 8 per cent two years ago, is expected to drop to an average of 2.7 per cent by 2025-26, aligning with central bank targets. The World Bank, which includes 189 member nations, aims to reduce poverty and raise living standards through grants and low-interest loans to poor economies. For low- and middle-income countries, or developing economies, growth is forecast at 4.1 per cent this year, slightly slowing to 4 per cent by 2026. However, the bank warns this pace is still "insufficient" to reduce global poverty.

World Bank Report Highlights Slowing Growth In Developing Economies Amid Global Conflicts

The report noted a long-term slowdown in developing economies, with average annual growth declining from 5.9 per cent in the 2000s to 5.1 per cent in the 2010s and just 3.5 per cent in the 2020s. Excluding China and India, many developing countries continue to lag behind wealthier nations in per-capita growth, hampered by weak investment, mounting debt, rising climate change costs, and protectionist policies restricting exports.

World Bank Chief Economist Indermit Gill warned that the next 25 years would be tougher for developing economies than the last, citing ongoing economic strain. The world's poorest countries, where per capita incomes are below USD 1,145, grew by just 3.6 per cent in 2024, hindered by escalating conflicts in regions like Gaza and Sudan.

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Global growth steady, poverty reduction insufficient.

"We have all-out war in Europe, the Middle East, and Africa," adding that conflicts remain "the worst economy killers." The bank predicts low-income countries' growth could rebound to 5.7 per cent this year and 5.9 per cent in 2026, contingent on conflict resolution in certain areas.

The World Bank has upgraded its outlook for the United States, expecting GDP growth at 2.3 per cent this year, down from 2.8 per cent in 2024 but an improvement from its earlier forecast of 1.8 per cent. Strong consumer spending, an increase in immigration reducing labour shortages, and productivity gains have supported US growth despite high interest rates.

Global Growth Trends: Europe’s Struggles, China’s Slowdown, India’s Resilience

Europe, meanwhile, continues to face sluggish growth. The World Bank revised its GDP growth projection for the eurozone down to 1 per cent for this year from 1.4 per cent previously, citing weak consumer spending, limited business investment, and high energy costs.
China, the world’s second-largest economy, is also expected to slow, with growth projected to decline from 4.9 per cent last year to 4.5 per cent in 2025 and 4 per cent in 2026. The ongoing real estate crisis has dampened consumer confidence, although exports and infrastructure investments remain stable.

Conversely, India, currently the world’s fastest-growing major economy, is expected to grow by 6.7 per cent in both 2025 and 2026. A recovery in agricultural output has boosted rural spending, though urban demand has been constrained by inflation and slower lending growth.

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The World Bank’s forecasts assume no significant shifts in global trade or fiscal policies. However, the outlook for the United States could change, as President-elect Donald Trump has proposed tax cuts, tariffs on foreign goods, and mass deportations of undocumented workers, which could increase inflation and disrupt global trade. The report concludes that US economic policy uncertainty continues to cast a shadow over global growth forecasts.