World Bank Raises Global Growth Forecast to 2.6% This Year Due to "US Boom," Citing "High Interest Rates and Protectionism Concerns"

Global Growth Forecast Up 0.2%P from January
US Growth Forecast Raised from 1.6% to 2.5% This Year
Inflation and Protectionism Highlighted as Global Economic Risks

Buoyed by the U.S. economic boom, the World Bank (WB) has raised its global economic growth forecast for this year by 0.2 percentage points to 2.6%. However, it expects that the pace of global economic growth will not return to pre-COVID-19 pandemic levels for the next several years. The World Bank analyzed that slower-than-expected inflation easing delaying interest rate cuts, along with a surge in trade sanctions due to the spread of protectionism, could pose obstacles to the global economic recovery.

In its World Economic Outlook released on the 11th (local time), the World Bank projected global economic growth at 2.6% for this year, up 0.2 percentage points from the January forecast of 2.4%. The growth forecast for 2025 remained unchanged at 2.7%.

The main factor behind the upward revision of the global growth rate was the stronger-than-expected growth of the U.S. economy. The World Bank raised its U.S. growth forecast for this year from 1.6% in January to 2.5%, an increase of 0.9 percentage points. Ayhan Kose, the World Bank’s Deputy Chief Economist, explained in an interview with the Associated Press that about 80% of the upward revision in the global growth forecast was due to the strong growth in the U.S.

Indermit Gill, the World Bank’s Chief Economist, said, "It is good news that the global economy is stabilizing faster than expected in January," adding, "This is the result of the U.S. economy showing unexpected strength."

However, the U.S. economy is expected to slow to a growth rate of 1.8% next year due to the cumulative effects of tightening policies and reduced government spending. The growth forecast for 2026 is also expected to be around 1.8%.

The Eurozone is projected to grow by 0.7% this year due to declines in investment, exports, and consumption. Next year, growth is expected to rebound to 1.4% with recovery in investment and consumption. China’s economy is expected to slow from last year’s 5.1% growth to 4.8% this year due to weakening consumption and a continued real estate slump. However, stronger-than-expected economic activities such as exports have led to an upward revision from the January forecast of 4.5%. The World Bank expects China’s growth to decline further to 4.1% next year and 4% in 2026.

Growth in emerging markets and developing countries is expected to decrease from 4.2% last year to 4% this year. The World Bank explained that three out of four low-income countries have lowered their growth forecasts compared to January.

The report did not include a forecast for South Korea.

The World Bank expects the global economy to maintain steady growth but not to recover to pre-pandemic levels for several years. Global economic growth rates were 3% in 2022, an estimated 2.6% in 2023, and a forecasted 2.6% in 2024. However, these figures fall short of the 10-year average growth rate of 3.1% before the pandemic.

Gill said, "After four years of upheaval caused by the pandemic, war, inflation, and tightening policies, it seems the global economic growth rate is stabilizing," but added, "Growth rates remain lower than before 2020, and the outlook for the world’s poorest countries is much more concerning."

The World Bank projected global inflation at 3.5% this year and 2.9% in 2025. Due to the slower-than-expected decline compared to January’s forecast, global central banks are expected to take a more cautious stance on interest rate cuts. Gill analyzed, "With interest rates remaining at higher levels for a longer period, there is a risk that the global economic outlook could become more vulnerable."

Global trade volume is expected to grow by 2.5% this year after stagnating last year, but it remains below pre-pandemic levels. Due to the spread of protectionism, 700 trade restriction measures on goods and 160 on services have been implemented this year, which is double the pre-pandemic level.

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