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World Bank Forecasts Global Economy To Grow 2.7% In 2025 And 2026, Marking A Period Of Stabilization

The global economy is projected to grow by 2.7% in 2025 and 2026, maintaining the same pace as in 2024, according to the latest report from the World Bank. This steady growth signals a phase of stabilization, with inflation and interest rates expected to gradually decrease.

For developing economies, growth is expected to remain resilient over the next two years, holding steady at around 4%. However, this growth is still constrained compared to pre-pandemic levels, raising concerns about the ongoing challenge of poverty reduction and broader development goals.

The World Bank highlighted that developing economies, which account for 60% of global growth, are likely to conclude the first quarter of the 21st century with the weakest long-term growth prospects since 2000. The first decade of the century saw remarkable growth, but the aftermath of the 2008 financial crisis, along with other global challenges, has slowed down progress.

Economic integration has weakened, as foreign direct investment (FDI) inflows and GDP share in developing economies are now roughly half of what they were in the early 2000s. Meanwhile, global trade restrictions have surged in 2024, with new barriers reaching five times the average of the 2010-2019 period. As a result, global economic growth has diminished, dropping from 5.9% in the 2000s to 5.1% in the 2010s, and now to 3.5% in the 2020s.

In a statement, Indermit Gill, the World Bank’s chief economist, expressed concern over the future challenges facing developing economies: “The next 25 years will be tougher than the last 25. Most of the factors that once boosted their rise have faded. In their place, we now face tough headwinds: high debt, weak investment, slow productivity growth, and the escalating costs of climate change.”

The report also noted the potential impact of US President-elect Donald Trump’s plan to implement a 10% tariff across a wide range of imports. This could further hinder an already sluggish global economic recovery.

However, there is still hope for stronger-than-expected growth if the world’s largest economies, particularly the US and China, regain momentum.

The increasing importance of developing economies is evident in the shifting global economic landscape. Developing nations now represent 45% of global GDP, up from just 25% in 2000. This growth is largely driven by rapid urbanization, industrialization, and technology adoption in regions like Asia, Africa, and Latin America.

Key factors fueling this expansion include the rise of the middle class, infrastructure development, and an expanding services sector. The World Bank reports that more than 40% of exports from developing economies now go to other developing nations, a significant increase from 20% in 2000. Additionally, these countries are becoming crucial sources of capital flows, remittances, and development aid to others.

M Ayhan Kose, the World Bank’s deputy chief economist, emphasized that developing economies must adopt bold, innovative policies to capitalize on new opportunities for cross-border cooperation amid a landscape shaped by policy uncertainty and escalating trade tensions.

UAE Embarks On 2031 National Investment Strategy To Boost Annual Foreign Inflows

The UAE has set a bold vision with its National Investment Strategy 2031, targeting an elevation in annual foreign investment inflows from AED112 billion ($30.5 billion) in 2023 to AED240 billion ($65.4 billion) by 2031. His Highness Sheikh Mohammed bin Rashid Al Maktoum highlighted the strategy’s goal to transform the UAE into a premier global investment hub. Aiming to swell the foreign direct investment stock from AED800 billion to AED2.2 trillion, this strategy focuses on key sectors: industry, financial services, transport and logistics, renewable energy, and telecommunications.

Key Initiatives And Economic Contributions

The approved strategy includes 12 new programs and 30 distinct initiatives, such as the Financial Sector Development and the Investment Offices Promotion Incubator. Currently, foreign direct investment contributes significantly to the GDP, with predictions to increase its share to over 30% of the total investments by 2031.

Dive deeper into the global market shifts in Wall Street Tumbles Amid Trade Tensions.

Technological And Digital Advancements

The strategy outlines the UAE’s vision to become a digital economy powerhouse by 2031, intending to enhance the digital economy’s current contribution to GDP from 9.7% to 19.4%. The Industrial Technology Transformation Index (ITTI) will also play a pivotal role in gauging technological advances and sustainability practices.

The introduction of a remote work system and the launch of the National Green Certificates Program further highlight the UAE’s efforts to harness global talent and promote sustainable development.

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