February 28, 2024

The World Bank’s GDP growth forecast for India for the current financial year is a full percentage point lower than the government’s first advance estimate of 7.3 percent

The global economy, while “surprisingly resilient”, is set for a dark outlook, with growth expected to slow down for a third year in a row in 2024, the World Bank has said.

After a low-base fueled rebound to 6.2 percent in 2021, the World Bank estimates global growth cooled to 3.0 percent in 2022 and then to 2.6 percent in 2023. It now projects the world economic growth to slow down further to 2.4 percent in 2024, before edging up to 2.7 percent in 2025 — well below the 3.1 percent average growth seen in the 2010s.

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Also Read: IMF, India cross swords over fiscal consolidation, FX intervention

“Yet beyond the next two years, the outlook is dark,” Indermit Gill, the bank’s chief economist, said in its Global Economic Prospects report, released on January 9.

“The end of 2024 will mark the halfway point of what was expected to be a transformative decade for development — when extreme poverty was to be extinguished, when major communicable diseases were to be eradicated, and when greenhouse-gas emissions were to be cut nearly in half,” Gill added.

“What looms instead is a wretched milestone: the weakest global growth performance of any half-decade since the 1990s, with people in one out of every four developing economies poorer than they were before the pandemic.”

According to the World Bank’s latest forecasts, most economies will likely grow at a slower rate in 2024 and 2025 than they did in the 10 years before the COVID-19 pandemic.

Gill warned that unless “corrective action” is taken, global growth will remain “well below potential” for the next half a decade.

 2023  2024  2025
World 2.6% 2.4% 2.7%
    US  2.5% 1.6% 1.7%
    Euro area 0.4% 0.7% 1.6%
    Japan 1.8%  0.9% 0.8%
    China 5.2% 4.5% 4.3%
    Russia 2.6% 1.3% 0.9%
    Brazil 3.1% 1.5% 2.2%
    South Africa 0.7% 1.3% 1.5%

Meanwhile, the World Bank sees India’s growth edging up steadily from 6.3 percent in 2023-24 to 6.4 percent in 2024-25 and 6.5 percent in 2025-26. Although the forecasts, unchanged from before, for the next two years are broadly in line with that of Indian authorities — the Reserve Bank of India (RBI), for instance, sees GDP growth at 6.5 percent in 2024-25 — the estimate for 2023-24 is a full percentage point lower than the statistics ministry’s recently-released first advance estimate of 7.3 percent.

Also Read: RBI model pegs India’s FY25 GDP growth at 6.0% vs official view of 6.5%

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“India is anticipated to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow,” the World Bank’s report said.

“Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets, including in the banking sector. Private consumption growth is likely to taper off, as the post-pandemic pent-up demand diminishes and persistent high food price inflation is likely to constrain spending, particularly among low-income households. Meanwhile, government consumption is expected to grow slowly, in line with the central government’s efforts to lower the share of current spending,” it added.

The comments from the World Bank come weeks before the Union government presents the Interim Budget for FY2024-25 on February 1 ahead of the national elections, which are likely to be held in April-May this year.