Global economic growth is expected to hold steady over the next two years, buoyed by stronger-than-expected performance from the US, China and Europe, muted fallout from tariff volatility, easing inflation, and rising artificial intelligence (AI) investments, according to the World Bank.
Ayhan Kose, deputy chief economist of the World Bank Group and head of its Prospects Group, called the upward revisions in the Global Economic Prospects Report “good news,” after the bank raised its growth forecast to 2.6 percent for this year and 2.7 percent for next year.
Kose said the revisions reflect unexpectedly solid performance in major economies and the fact that trade disruptions were less damaging than feared, noting that “International supply chains turned out to be much more resilient than expected.”
He added that easing inflation and stronger financial conditions, along with AI investment, are propping up growth, saying, “We will see this year whether this is permanent or temporary, but the good news is that we have pulled growth up and expect growth to continue steadily in the next two years.”
Still, Kose warned that frequent changes in customs tariffs remain a key threat, alongside the risk of renewed financial shocks and mounting global debt — a problem he said is especially acute in developing and low-income countries following the pandemic.
He stressed the need for decisive fiscal action, saying: “The most important thing is to put a serious medium-term fiscal program on the table; the revenue side of this program needs to be very strong, measures to increase revenues need to be taken, and on the other side, increasing efficiency in expenditures is very important.”
On inflation, Kose said the downward trend seen last year is likely to persist, stating: “We saw a slight downward trend in inflation around the world last year, and we expect this to continue.”
He also flagged looming labor market pressures, warning that job creation in developing countries has lagged dangerously behind population growth. Laying out what must be done, he said: “We need to strengthen the investment environment, contribute to the growth of firms and work to ensure that those who will newly join the workforce are educated in a way that they can work in productive, high value-added areas and gain job qualifications.”
On artificial intelligence, Kose cautioned against simplistic assessments, noting that while AI will eliminate some jobs, it will create others, adding: “So government policies need to step in to establish digital infrastructure and ensure new generations join the business world by receiving necessary education.”