World Bank: 'Global economy to grow by 2.7 percent in 2025'

The World Bank has kept its global economic growth forecast at 2.7 percent for this year and next year. The report notes that global economic growth has stabilized as inflation approaches targets and monetary easing supports activity in both advanced and developing economies.

The Bank published the January 2025 edition of its Global Economic Prospects report.

According to the report, global growth has stabilized as inflation nears targets and monetary easing supports activity in both advanced and emerging market and developing economies.

The Bank's report notes that with the gradual decline of inflation and interest rates, global economic growth is expected to be 2.7 percent in 2025 and 2026, just as it was last year.

WARNING FOR DEVELOPING ECONOMIES

The report points out that the global economy is on a path to remain at a low growth rate that will be insufficient to promote sustainable economic development. It also highlights risks stemming from increased policy uncertainty, adverse trade policy changes, geopolitical tensions, persistent inflation, and climate-related natural disasters.

The report states that developing economies, which account for 60 percent of global economic growth, are projected to finish the first quarter of the 21st century with their weakest long-term growth outlook since 2000. It further notes that even if the global economy stabilizes over the next two years, developing economies are expected to make slower progress in catching up to the income levels of advanced economies.

The report indicates that growth in developing economies is expected to remain around 4 percent over the next two years, which would be a weaker performance than before the COVID-19 pandemic and insufficient to drive the progress needed to reduce poverty and achieve broader development goals.

The report emphasizes the need for global policy efforts to protect trade, address debt vulnerabilities, and combat climate change.

POSITIVE GROWTH FORECASTS FOR THE US

The report also includes growth forecasts for individual countries, noting that the US economic growth forecast has been raised from 1.8 percent to 2.3 percent for this year and from 1.8 percent to 2 percent for next year.

Drawing attention to the uncertainty regarding the timing and magnitude of potential changes in US trade and fiscal policies, the report states that a 10 percent increase in tariffs applied by the US to all trading partners could reduce global growth by 0.2 percentage points this year compared to baseline forecasts, assuming no retaliation. It was noted that this could increase further if retaliation is taken into account.

The report states that the growth expectation for the Eurozone economy has been lowered from 1.4 percent to 1 percent for this year and from 1.3 percent to 1.2 percent for next year.

The growth forecast for the Chinese economy has been raised from 4.1 percent to 4.5 percent for this year, while the country's growth expectation for next year is maintained at 4 percent, the report stated.

OUTLOOK FOR THE TURKISH ECONOMY

The report states that the Turkish economy is expected to grow by 2.6 percent this year and 3.8 percent next year.

In its June 2024 forecasts, the World Bank had projected that the Turkish economy would grow by 3.6 percent in 2025 and 4.3 percent in 2026.

The report notes that Turkey's external imbalances have improved, the current account deficit has narrowed sharply, international reserves have increased, and the risk premium has fallen, contributing to a significant reduction in country spreads.

News Source: AA