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India to remain fastest growing big economy in 2024 : World Bank

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NEW YORK : India, despite a projected slowdown this year, will continue to be the world’s fastest-growing large economy, according to the World Bank‘s latest Global Economic Prospects report.

The world’s most populous nation is forecast to expand 6.6% this year, down from 8.2% in 2023, on the back of strong domestic demand and a surge in investment. India’s growth is propelling South Asia to be the fastest-growing region, the World Bank said in the report published Tuesday.

Global economic growth will hold steady at 2.6% in 2024 after three straight years of decline, in what appears to be a “final approach for a ‘soft landing.'” But overall risks facing the world’s economy are tilted toward the negative.

The East Asia and Pacific region — which includes China, South Korea, ASEAN nations and Pacific island nations — is expected to slow to 4% this year from 4.2%. China’s growth rate is projected to drop to 4.8% from 5.2%.

China’s ongoing property sector slump, weak retail sales and poor business sentiment are hurting investment as policy uncertainty both domestically and internationally scares off investors. A worse than expected downturn in China could spill over into global commodity price volatility should Chinese demand for energy and other commodities weaken. Economies with strong trade ties to China could be especially vulnerable.

Indonesia and Vietnam will be bright spots among major economies in the region with growth projections at 5% and 5.5%, respectively.

Among advanced economies, Japan’s sluggish consumption growth, slowing exports and a stabilizing tourism sector are set to cause its economy to grow at 0.7% in 2024 compared to 1.9% last year. Though stable, the projected growth remains well below levels in the decade before the pandemic and “insufficient” for reaching key worldwide development goals, the World Bank said.

In the U.S., November’s presidential election has the potential to escalate geopolitical tensions, fragment trade, and hamper Asia-Pacific economies. The global lender said the protectionist trade policies of former U.S. President Donald Trump could be an issue should he win the race.

“U.S. companies appear to be shifting some operations from China to other countries. This trend may accelerate as the expectations of swift resolutions of trade tensions have declined over the past year,” World Bank Deputy Chief Economist Ayhan Kose said. “Recent trade tensions have led to shifts in trade patterns and trade flows.”

The U.S. will be the standout advanced economy as it is projected to hold steady at 2.5% growth for the second year in a row in 2024, with a chance of stronger than expected growth. “U.S. dynamism, in fact, is one reason the global economy enjoys some upside potential over the next two years,” the report says.

Other positive trends could include inflation — currently projected to average 3.5% this year — coming down faster than expected

Nevertheless, interest rates are expected to remain high worldwide as the “higher for longer” rates environment keeps global financial conditions tight, hurting developing economies the hardest.

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