The global economy is expected to stabilize for the first time in three years in 2024, but at a weak level by recent historical standards, according to the World Bank’s latest Global Economic Prospects report released Tuesday.
Global growth is projected to remain stable at 2.6% in 2024 before rising to an average of 2.7% in 2025-26, well below the average of 3.1% in the decade before COVID-19 , according to the report.
The bank’s latest outlook marks an increase from the 2.4% growth for 2024 it had forecast in January.
Regarding growth in the Middle East, the World Bank lowered its forecast from 3.5% to 2.8% in 2024, reflecting the extensions of oil production cuts and the ongoing conflict in the region.
However, growth is expected to increase to 4.2% in 2025, it said.
The forecast implies that over the course of 2024-26 countries that together represent more than 80% of the world’s population and global GDP would continue to grow more slowly than in the decade before COVID-19.
Overall, developing economies are projected to grow 4% on average during 2024-25, slightly slower than in 2023.
Growth in low-income economies is expected to accelerate to 5% in 2024 from 3.8% in 2023.
However, growth forecasts for 2024 reflect reductions in three out of four low-income economies since January.
In advanced economies, growth will remain stable at 1.5% in 2024 before rising to 1.7% in 2025.
The report also says that global inflation is expected to moderate to 3.5% in 2024 and 2.9% in 2025, but the pace of decline is slower than projected just six months ago.
As a result, many central banks are expected to remain cautious about reducing official interest rates.
The World Bank said global interest rates are likely to remain high by the standards of recent decades: averaging around 4% over 2025-26, about double the 2000-19 average.
Middle East Region
The World Bank said geopolitical tensions and political uncertainty are high in the Middle East and North Africa (MENA) region.
“The human suffering and destruction of physical capital in the West Bank and Gaza as a result of the ongoing conflict is immense. Attacks on shipping in the Red Sea have reduced transit through the Suez Canal, disrupted international trade and increased political uncertainty, particularly in neighboring countries,” the report states.
Activity for both oil exporters and importers in the MENA region continued to weaken in early to mid-2024.
In member countries of the Gulf Cooperation Council (GCC), oil activity has stagnated, the World Bank said.
In June 2024, oil production cuts were extended by one year to the end of 2025, and it was agreed to maintain additional voluntary production adjustments until the end of September 2024 before phasing them out from October.
Activity recovered in non-GCC oil exporters that were exempt from production cut agreements.
Saudi Arabia
In Saudi Arabia, the World Bank said growth in 2024 is projected to be supported by non-oil activity, and a gradual resumption of oil activity is expected to lift growth in 2025.
“In Saudi Arabia, the economy contracted in the first quarter of 2024, compared to a year ago, the third consecutive quarter of output contraction. However, growth in non-oil activity has remained robust, driven by both private consumption and business investment, offsetting to some extent the contraction in oil activity,” the report says.
Additionally, activity is forecast to increase in 2024 despite a projected decline in oil production.
“This growth is attributed to solid non-oil activity, driven by strong private consumption and investment, supported by fiscal and monetary policies. In 2025, a gradual resumption of oil activity is expected to boost growth,” the report concluded.
Oil importers
Among oil importers, growth in 2024 is expected to rise to 2.9 percent and then rise to 4% annually in 2025-26, according to the World Bank report.
In Egypt, growth is forecast to pick up, driven by investment growth fueled in part by a large-scale deal with the United Arab Emirates.
Growth in Jordan is expected to remain stable, although tourism-related activities will be affected in the short term.
In Tunisia, growth is expected to recover, but activity in Djibouti and Morocco is expected to weaken in 2024.
The high uncertainty surrounding the economic prospects in the West Bank and Gaza this year reflects the severity of the conflict. The economy of the West Bank and Gaza is assumed to contract by at least a further 6.5% – with the possibility of a contraction of up to 9.4% – in 2024.
In Syria and Yemen, the outlook is bleak and uncertain, given the ongoing conflict, domestic violence and unrest, and tensions in the Red Sea, he said.
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Growth in MENA is expected to rise to 2.8% in 2024 and 4.2% in 2025, mainly due to a gradual increase in oil production and strengthened activity from the fourth quarter of 2024, according to the report.
It said growth in GCC countries is expected to strengthen to 2.8% in 2024 and 4.7% in 2025.
Among non-GCC oil exporters, the projected recovery in the oil sector in 2025 will help strengthen growth in Algeria and Iraq.
Risks
An important downside risk is the possible escalation of armed conflicts in the region. For oil importers, a tightening of global financial conditions could lead to capital outflows and exchange rate depreciation.
The World Bank said countries with high public debt would see higher debt service burdens due to higher borrowing costs and high risk of financial instability.
Furthermore, climate change-induced severe weather events, as well as other types of natural disasters, remain a significant risk in MENA. The negative effects of weaker-than-expected growth in China would likely hit oil exporters through lower oil demand and prices.
