In 2024, the world economy has been predicted to achieve stability for the first time in three years. Important to note that while most analysts believe it will reach stability, the growth expected will be weaker than by recent historical standards. Analysts reported seeing a growth rate of 2.6% in 2024. From 2025 to 2026, many analysts believe that it could inch up to 2.7%. In the decade before COVID struck, the world economy continued to grow at an average rate of 3.1%.
Forecast with Some Minor Level of Gloom
Unfortunately, while this rate does show recovery from the previous years when the world economy wasn’t as stable, it still hasn’t reached the same level as it had achieved before. On a collective level, over 80% of the world’s population and global GDP will continue growing at a rate slower than in the decade before COVID-19.
Not all countries will experience the same level of growth. For example, most analysts predict that the developing economies will grow at a rate of 4% on average from 2024 to 2025. This rate makes it slower than in 2023. Low-income countries could expect to see a growth rate of 5% in 2024. The more advanced economies will see a growth rate of 1.5% before rising to 1.7% in 2025.
Much Upheaval to the World Economy
The world economy in the last four years has experienced extreme issues with the pandemic, wars, monetary tightening, and inflation. Despite all of this, it appears global economic growth will continue at a pace ready to steady itself. The prospects for some of the poorest economies will be the most troublesome. They face an increase in problems like constricting trade possibilities, punishing debt levels, and costly climate events.
For developing economies, they will need to look for ways to encourage private investors to bring more money to their countries. They will also need to improve education, reduce their public debt, health, and improve their infrastructure. The International Developmental Association understands how the poorest among them may struggle. Because of that, they offer assistance to over 75 countries eligible for concessional assistance.
One out of Every Four Countries Poorer Than Before the Pandemic
The pandemic wreaked chaos on the world economy, and one out of every four countries came out poorer because of it. For countries in conflict zones, the situation becomes even worse when that number goes even higher. The income gap that you see between the developing countries and the advanced economies will continue to grow from 2024 to 2025 with nearly half of all the developing economies seeing the gap rise.
That would make it the highest rate for an income gap since the 1990s. One of the most important indicators of this would be the living standards. This will only grow at a rate of 3.0%. That number is less when you compare it to the growth rate, which was set at 3.8%. Obviously, at least it is growing and not declining, but this shows you where the world economy currently sits.
Inflation and Its Effects on the World Economy
Inflation has, unfortunately, taken a big bite out of the world economy. While recovering from the pandemic, inflation rose simultaneously in most countries around the world. In 2024, it has begun to stabilize at 3.5%. In 2025, most analysts expect it to drop even further at 2.9%. Some say that this pace is slower than what they would like. For example, many of the central banks remain cautious when it comes to lowering their policy interest rates.
When you compare it to the global interest rates from over the last decade, they continue to remain high by that standard. You could expect to see an average of 4% from 2025 to 2026. That rate sits at about double what was seen from 2000 to 2019.
Unfortunately, while the food and energy prices began to stabilize all over the globe, core inflation continues at a relatively uncontrolled pace. It could even remain that way for the foreseeable future. If this happens, the central banks in the more advanced economies will delay their interest rate cuts. In that kind of environment, it means that you would see tighter global financial conditions. Ultimately, this will lead to weaker growth in the developing economies.
What are the Global Risks?
The trade tensions between major economies like the U.S. and China will continue to put pressure on the world economy. China’s exports slowed further in August 2024, and this could be an indication of what we may see ahead as trade tensions continue to mount. This economic conflict has existed for decades, but it exploded in 2018 when President Donald Trump began to set tariffs on Chinese goods. With the election coming up, further tensions could arise if former President Donald Trump is elected to office for the second time since his policies are already known to be more hostile toward China. Kamala Harris may be more friendly, but many believe that she would focus on countering China’s rise.
Many countries have also begun to look inward toward their production as they restrict cross-border commerce. Since the pandemic began, trade restrictions doubled around the world. Trade policy uncertainty is also another risk, and this goes back to the upcoming election between Kamala Harris and former President Donald Trump. No one knows what the policies will be until they see who wins the presidential office. When trade policy uncertainty happens, you see less investment. The trade war roller coaster poses one of the biggest risks to the world economy.
Conclusion
While the world economy hasn’t recovered from its previous pre-pandemic levels, you still have reasons for optimism because it still shows growth. It could be the opposite where you see no growth at all or even a decline. It could also be that in the coming years, the world economy will continue to grow more stable, but there are still risks that will need to be overcome to reach that level. Once past the risks, the picture looks great.
In 2024, the world economy has been predicted to achieve stability for the first time in three years. Important to note that while most analysts believe it will reach stability, the growth expected will be weaker than by recent historical standards. Analysts reported seeing a growth rate of 2.6% in 2024. From 2025 to 2026, many analysts believe that it could inch up to 2.7%. In the decade before COVID struck, the world economy continued to grow at an average rate of 3.1%.
Forecast with Some Minor Level of Gloom
Unfortunately, while this rate does show recovery from the previous years when the world economy wasn’t as stable, it still hasn’t reached the same level as it had achieved before. On a collective level, over 80% of the world’s population and global GDP will continue growing at a rate slower than in the decade before COVID-19.
Not all countries will experience the same level of growth. For example, most analysts predict that the developing economies will grow at a rate of 4% on average from 2024 to 2025. This rate makes it slower than in 2023. Low-income countries could expect to see a growth rate of 5% in 2024. The more advanced economies will see a growth rate of 1.5% before rising to 1.7% in 2025.
Much Upheaval to the World Economy
The world economy in the last four years has experienced extreme issues with the pandemic, wars, monetary tightening, and inflation. Despite all of this, it appears global economic growth will continue at a pace ready to steady itself. The prospects for some of the poorest economies will be the most troublesome. They face an increase in problems like constricting trade possibilities, punishing debt levels, and costly climate events.
For developing economies, they will need to look for ways to encourage private investors to bring more money to their countries. They will also need to improve education, reduce their public debt, health, and improve their infrastructure. The International Developmental Association understands how the poorest among them may struggle. Because of that, they offer assistance to over 75 countries eligible for concessional assistance.
One out of Every Four Countries Poorer Than Before the Pandemic
The pandemic wreaked chaos on the world economy, and one out of every four countries came out poorer because of it. For countries in conflict zones, the situation becomes even worse when that number goes even higher. The income gap that you see between the developing countries and the advanced economies will continue to grow from 2024 to 2025 with nearly half of all the developing economies seeing the gap rise.
That would make it the highest rate for an income gap since the 1990s. One of the most important indicators of this would be the living standards. This will only grow at a rate of 3.0%. That number is less when you compare it to the growth rate, which was set at 3.8%. Obviously, at least it is growing and not declining, but this shows you where the world economy currently sits.
Inflation and Its Effects on the World Economy
Inflation has, unfortunately, taken a big bite out of the world economy. While recovering from the pandemic, inflation rose simultaneously in most countries around the world. In 2024, it has begun to stabilize at 3.5%. In 2025, most analysts expect it to drop even further at 2.9%. Some say that this pace is slower than what they would like. For example, many of the central banks remain cautious when it comes to lowering their policy interest rates.
When you compare it to the global interest rates from over the last decade, they continue to remain high by that standard. You could expect to see an average of 4% from 2025 to 2026. That rate sits at about double what was seen from 2000 to 2019.
Unfortunately, while the food and energy prices began to stabilize all over the globe, core inflation continues at a relatively uncontrolled pace. It could even remain that way for the foreseeable future. If this happens, the central banks in the more advanced economies will delay their interest rate cuts. In that kind of environment, it means that you would see tighter global financial conditions. Ultimately, this will lead to weaker growth in the developing economies.
What are the Global Risks?
The trade tensions between major economies like the U.S. and China will continue to put pressure on the world economy. China’s exports slowed further in August 2024, and this could be an indication of what we may see ahead as trade tensions continue to mount. This economic conflict has existed for decades, but it exploded in 2018 when President Donald Trump began to set tariffs on Chinese goods. With the election coming up, further tensions could arise if former President Donald Trump is elected to office for the second time since his policies are already known to be more hostile toward China. Kamala Harris may be more friendly, but many believe that she would focus on countering China’s rise.
Many countries have also begun to look inward toward their production as they restrict cross-border commerce. Since the pandemic began, trade restrictions doubled around the world. Trade policy uncertainty is also another risk, and this goes back to the upcoming election between Kamala Harris and former President Donald Trump. No one knows what the policies will be until they see who wins the presidential office. When trade policy uncertainty happens, you see less investment. The trade war roller coaster poses one of the biggest risks to the world economy.
Conclusion
While the world economy hasn’t recovered from its previous pre-pandemic levels, you still have reasons for optimism because it still shows growth. It could be the opposite where you see no growth at all or even a decline. It could also be that in the coming years, the world economy will continue to grow more stable, but there are still risks that will need to be overcome to reach that level. Once past the risks, the picture looks great.
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