Three major threats to the world economy

The World Bank (WB) recently reported that the global GDP is facing pressure from three main factors: high interest rates, military conflicts, and political fluctuations. Despite forecasting a global economic growth of 2.6% this year, slightly higher than previous expectations, the WB warns that growth remains uneven and has not yet reached pre-pandemic levels.

Chief economist Indermit Gill commented that after years of pandemic, conflict, inflation, and monetary tightening, economic growth appears to have stabilized. However, GDP still remains lower than it was prior to 2020, with concerns remaining for the world’s poorest economies.

The global economy is currently at risk due to high interest rates, with inflation expected to slow down but at a slower rate than anticipated. The World Bank predicts that global interest rates will average around 4% in 2025 and 2026, nearly double what they were two decades ago. This could lead to tighter financial conditions and slower growth in developing countries.

In addition to high interest rates, geopolitical tensions, such as conflicts in areas like Russia-Ukraine and Israel-Hamas, pose a threat to global growth by driving up oil prices and transportation costs. Political upheavals, including upcoming elections in major economies like India, Mexico, the US, France, and the UK could also bring changes in foreign and economic policies, adding further pressure to global trade and economic activities.

The recent escalation of trade tensions between major economies like the US and China, as well as the EU imposing tariffs on Chinese goods, could further exacerbate the situation. The possibility of countries adopting more protectionist policies could hinder global trade and economic growth, as noted in the World Bank report.