The World Bank expects the United States to be a key driver of global economic growth this year, upgrading its gross domestic product (GDP) forecast for the country by 0.9 percentage points.
“Global growth is envisaged to reach a slightly faster pace this year than previously expected, due mainly to the continued solid expansion of the U.S. economy,” a June 11 report from the bank said. The institution upgraded expected global growth for 2024 by 0.2 percentage points, to 2.6 percent.
Growth was revised higher for the United States by 0.9 percentage points, to 2.5 percent, the highest among all advanced economies, including Europe and Japan.
In 2023, growth in the United States strengthened to 2.5 percent, which the World Bank attributes primarily to “robust consumption, government spending, and significantly reduced imports of goods and services.” This year, “weak activity in the euro area and Japan, in large part as a result of continued feeble domestic demand, will be accompanied by resilient growth in the United States.”
The World Bank expects the easing of monetary policy in the United States to begin later than assumed earlier because of elevated inflation and robust economic activity.
The 0.9 percentage-point upward revision of U.S. GDP was done after this year’s data “surprised to the upside, particularly on the consumer spending side,” the report stated.
However, the country’s GDP is projected to come down to 1.8 percent next year, with the slowdown mostly a result of “cumulative effects of past monetary tightening and a contractionary fiscal stance.”
The bank expects growth to remain at 1.8 percent in 2026 as well. By the end of this year, borrowing rates are estimated to decline significantly as inflation comes down.
Core inflation—which excludes food and energy—remains high, and could pose a problem to global growth, Ayhan Kose, the World Bank’s deputy chief economist, said.
Growth Factors and Challenges
U.S. GDP declined by 2.2 percent in 2020 amid the pandemic, after which it saw 5.8 percent growth the following year. The growth rate slowed to 1.9 percent in 2022 and increased slightly to 2.5 percent last year.In April, the Conference Board Leading Economic Index (LEI) fell by 0.6 percent after a 0.3 percent fall a month earlier. The decline confirmed that “softer economic conditions lay ahead” for the United States, said Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board.
“While the LEI’s six-month and annual growth rates no longer signal a forthcoming recession, they still point to serious headwinds to growth ahead,” she said.
“Elevated inflation, high interest rates, rising household debt, and depleted pandemic savings are all expected to continue weighing on the U.S. economy in 2024. As a result, we project that real GDP growth will slow to under 1 percent over the second quarter to the third-quarter 2024 period.”
JPMorgan has predicted U.S. economic growth to decelerate this year as the effects of monetary policies play out. The institution is expecting just 0.7 percent growth in 2024.
A March report by Deloitte had a far more positive outlook for the United States. It foresees a growth rate of 2.4 percent this year, close to projections made by the World Bank.
“Deloitte’s baseline forecast remains optimistic, and we expect the U.S. economy to continue to perform well in the short term thanks to strength in the job market, consumer spending, and exports,” it said.
Consumer spending, investment, and government spending are expected to grow by a minimum of 2 percent this year. Exports are predicted to grow by more than 4 percent. Inflation is expected to decline from around 3 percent in the second half of the year.
