The World Bank expects global economic growth to reach a minimum in the first half of this decade.

The recovery of most developed economies of the world is once again being delayed, as follows from the updated global economic development forecast published by the World Bank (WB). According to analysts, global GDP growth rates in the first half of this decade may be the lowest in the last 30 years. Analysts see the possibility of a more dynamic revival of the economy in organizing local investment booms in developing countries – where the effect of investments will be noticeable faster. The growth rate of the Russian economy over the coming years, according to the World Bank, will also slow down, and the Russian authorities intend to adhere to a similar investment strategy, but relying on internal resources. However, the prospects for this option in the context of a strict monetary policy and a decrease in the influx of foreign investment due to sanctions are not yet entirely clear.

Although the risks of a global recession are decreasing, geopolitical tensions are growing, creating “new threats and challenges” for the global economy, the January report said. forecast Global Economic Prospects World Bank. It is expected that global economic growth in 2024 will be even more subdued – at 2.4% after 2.6% in 2023.

Overall, the increase in global GDP in the first half of this decade may be the lowest in the last 30 years.

Despite the different trajectories of crises caused by the spread of COVID-19 and the development of military conflicts (including the Russian military operation in Ukraine), the World Bank does not expect serious economic growth in the coming years from either developed or developing countries: forecasts given by analysts in a similar June review, worsened for both the former and the latter. The revision in estimates is largely due to the tightening of monetary policy by the ECB and the Federal Reserve, due to which the industrial sector’s recovery is extremely muted.

Growth estimates have also been slightly lowered for the economy China, which was still counted on as the main support for global growth: expectations for its GDP growth were reduced to 5.2% from 5.6% in 2023, to 4.5% from 4.6% in 2024 and to 4 .3% from 4.4% in 2025. It should be noted that due to the slower-than-expected pace of recovery in China (despite the government’s stimulus measures), demand in European countries remains restrained, which affects their economic growth rates. Thus, it is now expected that GDP euro area in 2024–2025 will increase by 0.7% and 1.6%, respectively (six months ago it was expected to be 1.3% and 2.3%, respectively). Let us recall that, as evidenced by the latest statistical data, a technical recession may be recorded in Europe: in the fourth quarter of 2023, euro zone GDP continued to decline after a decline of 0.1% in the third (see Kommersant on January 9). So far, the World Bank believes that at the end of last year the EU economy grew by 0.4%.

The economy, apparently, turned out to be more resistant to the consequences of a strict monetary policy and external crises than analysts predicted USA: the estimates given by the World Bank in June have been improved. The forecast for GDP growth in 2023 was raised to 2.5% from 1.1% expected in June, and in 2024 – to 1.6% from 0.8%. But in 2025, the US economy is forecast to grow 1.7%, rather than the 2.3% expected in June.

The World Bank emphasizes that it is the stability of the United States that allows us to consider the economic situation at the beginning of this year better than at the beginning of last year.

However, this is rather a formal improvement – rapid and high-quality global growth, as is clear from the data, has not yet been recorded and is not even expected. The World Bank pins its hopes for a return to it on the organization of local investment booms in developing countries: the January forecast contains the first recommendations on how they can be achieved and assumptions about what they can lead to. It is assumed that to accelerate investment, an “integrated approach” is needed, including, among other things, expanding trade and financial flows and improving the investment climate. The World Bank sees potential effects as increasing per capita income, increasing productivity and reducing poverty. In support, the authors of the review refer to rich global experience – citing data on more than 200 investment booms that have been “created” in the world since the 1950s.

A similar strategy for reviving the economy is being discussed in Russia. Let us recall that the authorities were counting on an investment boom even before the pandemic, but the uncertainty associated first with the spread of COVID-19, and then with the military operation in Ukraine, pushed back these plans. A return to them is evidenced, among other things, by the continuing expansion of the range of instruments for stimulating investment that the authorities are ready to offer to companies (see Kommersant, April 18, 2023). However, Russian plans do not fully comply with the recommendations of the World Bank – under the conditions of sanctions there is no need to count on external investments from the Russian Federation, so it is planned to rely on internal resources – the use of which, in turn, is limited by the high cost of loans and uncertainty of prospects.

It should be noted that the World Bank raised its forecast for Russian GDP growth in 2023 to 2.6% from the 1.6% expected in October. Although Rosstat’s latest 2022 GDP recalculation and booming private consumption at the end of the year have raised the possibility that economic growth in 2023 could approach the 3.5% sought by the Kremlin, the 2.6% figure is in line with the Center for Development’s consensus forecasts. (2.6%, according to polls November 1–14, 2023) and the Central Bank (3.1% – December forecast based on polls in October, the previous value was 2.5%). The World Bank attributes Russia’s stronger-than-expected GDP growth in the past year, in particular, to significant budget support, including high military spending.

The pace of economic growth in Russia in 2024 is expected to “slow down to 1.3% and further to 0.9% in 2025; The tightening of the Bank of Russia’s policy is likely to weaken domestic demand,” the WB report says.

The economic growth of the Russian Federation will also be hampered by limited capacity and labor shortages. The bank’s economists’ expectations for the foreseeable future are close to the domestic Russian consensus (“Development Center” HSE – 1.4% and 1.4% in 2024 and 2025, Bank of Russia – 1.3% and 1.5%, respectively). The FocusEconomics consensus forecast, based on surveys of foreign forecasters, suggests Russian economic growth of 1.6% in 2023 and a slowdown to 1.2% in 2024-2025.

“In 2023, the GDP growth estimate may be at the level of 3–3.5% y/y. In real terms, this represents an increase of almost 2% above pre-crisis levels. From 2024, we expect a slowdown in GDP dynamics – growth close to potential (1.5% y/y in 2024 and 0.9% y/y thereafter),” agree Raiffeisenbank economists, citing depletion among the factors for cooling growth recovery impulse and achievement of pre-crisis levels, including in capacity utilization, limited investment potential of the private sector, continuing restrictions on foreign trade and tight monetary conditions. GDP growth will slow down from 3.3–3.5% in 2023 to 1–1.5% in 2024; in terms of quarterly seasonally adjusted dynamics, the economy will almost stop in the second half of 2024, Dmitry Polevoy from “ Astra Asset Management”: According to his estimates, “inflation, having completed 2023 near 7.6%, will remain at an elevated level in the first half of 2024, peaking at ~8.5% in July, but then turning around and dropping to 5– 5.5% by the end of 2024; The Central Bank rate will remain at 16% until June, when it could be reduced to 14.50-15%, by the end of the year I expect 11%, in 2025 – to 8-9%.”

Kristina Borovikova, Artem Chugunov