World Bank Projects 2.1% Economic Growth This Year

World Bank to Release 'Global Economic Prospects Report' on 6th
Growth Rate Forecast Revised Upward by 0.4 Percentage Points to 2.1% Since January

The World Bank (WB) announced on the 6th (local time) in its Global Economic Prospects report that the global economic growth rate this year is expected to be 2.1%, down 1 percentage point from last year. However, this figure is 0.4 percentage points higher than the 1.7% growth rate forecast by the World Bank in January this year. The World Bank also noted concerns about a decline in potential growth rates, especially in emerging and developing countries, and emphasized the need for bold structural reform support.

In the Global Economic Prospects report released that day, the World Bank stated that although the global economy is showing stronger recovery than initially expected earlier this year, the trend of slowing growth continues. In particular, it forecast that the growth rate of advanced economies will slow from 2.6% last year to 0.7% this year. Due to the impact of tight monetary policies aimed at curbing high inflation, the growth rate for next year is also expected to be limited to 2.4%.

The World Bank explained, “Thanks to the faster-than-expected resumption of economic activities in China and the recovery of consumption in the United States, the growth rates for major countries have been revised upward.” However, it diagnosed that “there remains a possibility of growth constraints due to various downside risks such as inflationary pressures, tight monetary policies, geopolitical tensions, and natural disasters.”

The United States’ growth rate for this year was presented at 1.1%, which is 0.6 percentage points higher than the forecast made in January. The recovery in consumption was seen as having a positive effect. The Euro area is also expected to see increased economic activity due to mild weather and a decline in natural gas prices, with a growth rate of 0.4% presented. In January, the Euro area’s growth rate was forecasted at 0.0%.

However, concerns about a decline in potential growth rates were noted, especially in emerging and developing countries. It was diagnosed that growth in countries other than China is constrained due to weakened external demand caused by tight monetary policies and fiscal consolidation. Growth rates of 4.0% for China, 1.5% for Europe and Central Asia, 1.5% for Latin America, and 2.2% for the Middle East and North Africa were forecasted.

Accordingly, the World Bank diagnosed that bold structural reforms centered on emerging and developing countries are needed over the long term. Specifically, it suggested ▲ expanding investments in infrastructure linked to the private sector, focusing on areas related to climate change (transportation, energy, smart agriculture, etc.) ▲ improving education systems to nurture talent capable of utilizing the latest technologies ▲ strengthening education and healthcare to increase labor participation rates of women and the elderly ▲ creating a ‘business-friendly environment’ through strict law enforcement, anti-corruption measures, enhancement of political stability, expansion of competition, and prevention of monopolies ▲ promoting international trade through FTA and easing trade barriers, and enhancing innovation in the service sector using digital technologies.

Furthermore, it emphasized, “Due to the long-term tightening policies of major central banks such as the United States, emerging and developing countries are facing unprecedented financial vulnerabilities, including high public and private sector debt.” It urged that “major central banks should expand communication with markets to prevent abrupt policy changes, and emerging and developing countries need to alleviate vulnerabilities through improvements in fiscal and financial policies.” It also noted that, amid expanding fiscal deficits and debt in low-income countries, it is a timely moment to support institutional improvements so that these countries can manage debt and improve fiscal transparency.

This content was produced with the assistance of AI translation services.