Global growth may acquire slightly faster pace this year

The global economy seems to be stabilising, following several years of overlapping negative shocks.Despite elevated financing costs and heightened geopolitical tensions, global activity firmed in early 2024, according to the World Bank.Global growth is envisaged to reach a slightly faster pace this year than previously expected, due mainly to the continued solid expansion of the US economy.However, the extent of expected declines in global interest rates has moderated amid lingering inflation pressures in key economies.By historical standards, the global outlook remains subdued: both advanced economies and emerging market and developing economies (EMDEs) are set to grow at a slower pace over 2024-26 than in the decade preceding the pandemic.Domestic demand is projected to improve in many EMDEs this year, in line with a moderate cyclical recovery from the effects of high inflation, tight financial conditions, and anaemic industrial activity, the World Bank noted.Moreover, significant challenges persist in vulnerable economies—including in low-income countries (LICs) and those facing elevated levels of conflict and violence—where growth prospects have deteriorated markedly since January.Global trade growth is recovering, supported by a pickup in goods trade. Services-trade growth is expected to provide less of a tailwind this year, given that tourism has nearly recovered to pre-pandemic levels.However, the trade outlook remains lacklustre compared to recent decades, partly reflecting a proliferation of trade-restrictive measures and elevated trade policy uncertainty.Aggregate commodity prices have increased since late last year. Amid fluctuations, average oil prices are expected to be slightly higher in 2024 than in 2023, underpinned by a tight demand-supply balance in a context of continued geopolitical tensions, the World Bank points out.Metals prices are expected to be little changed over the forecast horizon, as demand related to metals-intensive clean energy investments and a broader pickup in global industrial activity attenuate the impact on commodity demand of declining real estate activity in China.Well-supplied markets for grains and other agricultural commodities should see edible food crop prices decline modestly.Inflation continues to wane globally, making progress toward central bank targets in advanced economies and EMDEs, but at a slower pace than previously expected.Core inflation has remained stubbornly high in many economies, supported by rapid growth of services prices. Over the remainder of 2024, continued tight monetary policy stances and slowing wage increases should help reduce inflation further.By the end of 2026, global inflation is expected to settle at an average rate of 2.8%, broadly consistent with central bank targets.The anticipated extent of monetary easing in advanced economies this year has diminished substantially since late 2023—by more than a percentage point in the case of the United States.Expected policy rate paths diverge across major economies, as the European Central Bank proceeds with policy easing while the US Federal Reserve keeps rates on hold for longer.Despite this market reassessment, global financial conditions have eased this year, reflecting solid risk appetite following last year’s progress on disinflation and diminished concerns about the possibility of a sharp slowdown in global growth.In particular, global equity markets have made sizeable gains, the World Bank said.