LDN - Business

World Bank says the global is economy is growing steadily, but not fast enough to help ease poverty

[January 17, 2025] By PAUL WISEMAN

WASHINGTON (AP) — The global economy is growing steadily in the face of war, protectionist trade policies and high interest rates. It just isn’t growing fast enough to bring relief to the world’s poorest, the World Bank said Thursday in its latest assessment of the global economy.

The bank expects the world economy to expand 2.7% in 2025 and again in 2026. It’s a remarkably consistent performance – matching 2023 and 2024 – but also a lackluster one. Growth is running 0.4 percentage points below the 2010-2019 average. The slump reflects lingering damage from the “adverse shocks of recent years,’’ including COVID-19 and Russia’s invasion of Ukraine.

The bank’s latest Global Economics Prospects report, which comes out in January and June, did offer some good news. Global inflation, which was running over 8% two years ago, is expected to slow to an average of 2.7% in 2025 and 2026, close to many central bank targets.

The World Bank, comprising 189 member nations, seeks to reduce poverty and boost living standards by providing grants and low-rate loans to poor economies.

For low- and middle-income countries – so-called developing economies – growth is expected to come in at 4.1% this year and slow slightly to 4% in 2026. The World Bank says that plodding pace of growth is “insufficient’’ to ease global poverty.

The World Bank noted that growth has been decelerating for years in the developing world – from a robust average of 5.9% a year in the 2000s to 5.1% in the 2010s to just 3.5% in the 2020s. Excluding China and India, those countries are lagging behind the world’s wealthy countries in per-capita economic growth.

Their economies have been hobbled by sluggish investment, high levels of debt, the increasing costs of climate change and growing protectionism that hurts their exports. None of those things seems likely to go away anytime soon. “The next 25 years will be a tougher slog for developing economies than the last 25,’’ World Bank chief economist Indermit Gill said in the report.

The world’s poorest countries – with per-person annual incomes below $1,145 – grew just 3.6% in 2024 “on account of escalating conflict and violence’’ in places like Gaza and Sudan.

“We have all-out war in Europe, in the Middle East and in Africa,’’ Gill told reporters ahead of the report’s release. “Conflicts are the worst economy killers.’’ The bank expects low-income countries’ growth to rebound to 5.7% this year and 5.9% in 2026, “contingent’’ on the easing of conflict in some places.

[to top of second column]

The World Bank building in Washington, Monday, April 5, 2021. (AP Photo/Andrew Harnik, File)

The World Bank marked up the outlook for the United States, the world’s largest economy. It now expects U.S. gross domestic product – the nation’s output of goods and services – to expand 2.3% this year. That is down from 2.8% in 2024 but up from the 1.8% the bank forecast for this year back in June. The American economy has managed to thrive despite high interest rates. U.S. growth has been boosted by strong consumer spending, an influx of immigrants who eased labor shortages and improvements in productivity.

Europe, by contrast, is expanding at an agonizingly slow pace. The World Bank downgraded its GDP growth forecast for the 20 countries that share the euro currency to 1% this year from the 1.4% it had projected in June. The bank cited “anemic’’ consumer spending, business investment and manufacturing activity, partly reflecting the cost of high energy prices.

The Chinese economy, the world’s second biggest, is expected to decelerate – from 4.9% growth last year to 4.5% in 2025 and 4% in 2026. China’s real estate market has crashed, demoralizing consumers and causing them to rein in their spending. But Chinese exports and investment in factories and infrastructure have been sturdy.

Meanwhile, India, which has supplanted China as the world’s fastest-growing major economy, is expected to see a 6.7% expansion both this year and next. In rural areas, a recovery in farm production has boosted consumer spending – though inflation and slow lending growth have discouraged shoppers in cities.

The World Bank’s forecasts assume no major shifts in trade or budget policies.

But in the United States, President-elect Donald Trump is promising big things – slashing taxes, slapping hefty tariffs on foreign goods, deporting millions of immigrants who are working in the country illegally. All those policies could drive up U.S. inflation and disrupt global trade. The bank said that the outlook for U.S. economic policy is “unclear, with resulting impacts on U.S. and global growth and inflation clouded by uncertainty.’’

Back to top