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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World Bank
- Establishment: The World Bank was established in 1944 to help rebuild Europe and Japan after World War II.
- It is one of the five institutions created at Bretton woods in 1944 and is affiliated to the United Nations.
- Membership: It has 189 member countries
- India is a founding member.
- Institution: World Bank comprises of five institutions:
- International Bank for Reconstruction and Development (IBRD): It provides commercial or concessional loans to only sovereign states or projects backed by sovereign states.
- International Development Association (IDA): It helps the world’s poorest countries and aims to reduce poverty by providing interest-free loans (called IDA Credits)
- International Finance Corporation (IFC): It finances the private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments.
- Multilateral Investment Guarantee (MIGA): It promotes foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people’s lives.
- International Centre for Settlement of Investment Disputes (ICSID): The world’s leading institution devoted to international investment dispute settlement.
- Key Reports:
- Global Financial Development Report; Commodity Markets Outlook; World Development Reports
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17 Jan 2025
