According to a World Bank forecast, global economic growth is stabilizing at a low level and is expected to level off at 2.7 percent this year and next. However, the World Bank warns that this is not enough to offset the damage caused by economic shocks such as the coronavirus pandemic in recent years. This is particularly dangerous for the poorest countries in the world. According to the Development Bank, 622 million people will continue to live in extreme poverty by 2030. “Hunger and malnutrition will be the fate of about the same number of people.”
Tariffs could further slow down growth
At the same time, the World Bank, based in Washington, warns of the negative effects that far-reaching tariffs would have on the global economy. The future US President Donald Trump, who will move back into the White House on Monday, is planning serious punitive measures – for example for goods from China, Canada, Mexico and possibly the European Union. “The timing and extent of possible changes in U.S. trade and financial policy are currently unclear,” it said. This clouds the outlook.
Estimates suggest that a 10 percentage point increase in U.S. tariffs across all trading partners could reduce global growth by 0.2 percentage points this year – if no retaliation is taken. “The expected negative effect could be amplified when proportional retaliatory tariffs are taken into account,” the report said. Global growth would then be around 0.3 percentage points lower in 2025.
World Bank: Ambitious goals were not achieved
Other risks to economic growth include slower progress in reducing inflation, the consequences of Russia’s invasion of Ukraine and the conflict in the Middle East, it said. The World Bank states: “As the first quarter of this century draws to a close, it is clear that the ambitious goals of recent decades cannot be achieved.”
The long-term growth prospects for low-income countries are worse than at any time since the beginning of the century. Emerging markets and developing countries, which had been on track to close the income gap with the richest economies at the beginning of the century, were now largely falling even further behind. Developing countries, which account for 60 percent of global growth, will end the first quarter of the 21st century with their weakest long-term growth prospects since 2000.
Germany is not getting going
The World Bank also considers growth in the euro area to be weak. The economic outlook predicts growth of 1.0 percent for 2025 – that is 0.4 percentage points less compared to the forecast from last June. The World Bank attributes this to weak consumption, weak business investment and weak industrial activity. Manufacturing and industrial production remained weak. This is particularly true for Germany, which accounts for almost 30 percent of the euro zone’s gross domestic product.