The global economy is expected to stabilize for the first time in three years in 2024 but at a level that is weak by recent historical standards, according to the World Bank’s latest Global Economic Prospects report released on Tuesday.
Global growth is projected to hold steady at 2.6% in 2024 before edging up to an average of 2.7% in 2025-26, well below the 3.1% average in the decade before COVID-19, the report said.
The bank's latest outlook marks an increase from the 2.4% growth for 2024 it had predicted in January.
Concerning growth in the Middle East, the World Bank downgraded 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 pick up to 4.2% in 2025, it said.
The forecast implies that over the course of 2024-26 countries that collectively account for more than 80% of the world’s population and global GDP would still be growing more slowly than they did in the decade before COVID-19.
Overall, developing economies are projected to grow 4% on average over 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, the forecasts for 2024 growth reflect downgrades in three out of every four low-income economies since January.
In advanced economies, growth is set to remain steady at 1.5% in 2024 before rising to 1.7% in 2025.
The report also said 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 was projected just six months ago.
Many central banks, as a result, are expected to remain cautious in lowering policy interest rates.
The World Bank said global interest rates are likely to remain high by the standards of recent decades—averaging about 4% over 2025-26, roughly double the 2000-19 average.
Middle East Region
The World Bank said geo-political tensions and policy uncertainty are elevated in the Middle East and North Africa (MENA) region.
“Human suffering and the destruction of physical capital in West Bank and Gaza arising from the ongoing conflict are immense. Attacks on shipping in the Red Sea have reduced transit through the Suez Canal, disrupted international trade, and heightened policy uncertainty, particularly in neighboring countries,” its report stated.
Activity by both oil exporters and importers in the MENA region remained weakened in early to the middle of 2024.
In member countries of the Gulf Cooperation Council (GCC), oil activity has been stagnant, the World Bank said.
In June 2024, oil production cuts were extended by a year until the end of 2025, and additional voluntary production adjustments were agreed to be maintained until the end of September 2024 before gradually phasing out from October.
Activity picked up 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 raise growth in 2025.
“In Saudi Arabia, the economy contracted in the first quarter of 2024, relative 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, somewhat offsetting a contraction of oil activity,” the report said.
Also, it noted, activity is forecast to increase in 2024 despite a projected decline in oil output.
“This growth is attributed to robust 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 raise growth,” the report found.
Oil Importers
Among oil importers, growth in 2024 is expected to pick up to 2.9 percent and then increase to 4% annually in 2025-26, the World Bank report said.
In Egypt, growth is projected to increase, propelled by investment growth partly spurred by a large-scale deal with the United Arab Emirates.
Growth in Jordan is anticipated to remain steady, although tourism-related activities will suffer in the short term.
In Tunisia, growth is forecast to rebound, but activity in Djibouti and Morocco is projected to soften in 2024.
High uncertainty around the economic outlook in West Bank and Gaza this year reflects the severity of the conflict. The economy of West Bank and Gaza is assumed to shrink, at least, by a further 6.5% —with the possibility of contraction by up to 9.4%—in 2024.
In Syria and Yemen, the outlook is subdued and uncertain, given the ongoing conflict, domestic violence and unrest, and tensions in the Red Sea, it said.
Outlook
Growth in MENA is expected to pick up to 2.8% in 2024 and 4.2% in 2025, mainly because of a gradual increase in oil production and strengthened activity since the fourth quarter of 2024, the report showed.
It said growth in GCC countries is forecast to strengthen to 2.8% in 2024 and 4.7% in 2025.
Among non-GCC oil exporters, a projected recovery in the oil sector in 2025 will help strengthen growth in Algeria and Iraq.
Risks
A major 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 government debt would see increased debt-service burdens due to higher borrowing costs and the elevated risk of financial instability.
Also, severe weather events induced by climate change, as well as other types of natural disasters, remain a significant risk in MENA. Negative spillovers from weaker-than-expected growth in China would likely affect oil exporters through lower demand and prices for oil.
