Global Economics Prospects Report

The World bank has recently released the January edition of its biennial Global Economics Prospects report.

Key Highlights of the Report

• Global Forecast:
  • Inflation: It is expected to slow down to an average rate of 2.7 per cent in 2025 and 2026, close to many central bank targets from over 8 per cent two years ago
  • Steady but Subdued Growth: The world economy will expand to 2.7 per cent in 2025 and again in 2026 showing a lackluster growth. 
    • Growth is running 0.4 percentage points below the 2010-2019 average which is insufficient to tackle poverty.
  • Risk: The global economy is facing downside risks such as adverse policy shifts and heightened policy uncertainty, growing trade fragmentation, slowing progress in reducing inflation, and weaker activity in major economies. 
• Developing Economies Growth:
  • Rate: For low and middle-income developing countries, growth is expected to come in at 4.1 per cent this year and slow slightly to 4 per cent in 2026.
  • Decelerating Growth: The Developing nations excluding China and India, has shown a decelerating trend from a robust average of 5.9 per cent a year in the 2000s to just 3.5 per cent in the 2020s. 
  • Negative Externalities: Developing economies are prone to sluggish investment, high levels of debt, the increasing costs of climate change and growing protectionism hurting exports.
• Low Income Economies Growth: The bank expects low-income countries growth to rebound to 5.7 per cent this year and 5.9 per cent in 2026 due to easing of conflict in some places.
• Third World Countries: The world’s poorest countries with per-person annual incomes below USD 1,145 grew just 3.6 per cent in 2024.
  • Reason: The main reason being escalating conflict and violence in these economies (Gaza and Sudan)  and lingering damage from the adverse shocks like  COVID-19 and Russia’s invasion of Ukraine.
• On India:  India  is expected to see a 6.7 per cent expansion both in 2025 and 2026 and has supplanted China as the world’s fastest-growing major economy.
  • Reason: The growth of demand in rural areas, a recovery in farm production has boosted consumer spending though inflation and slow lending growth have discouraged shoppers in cities.

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