Ankara: The World Bank has announced a downward revision in its global growth forecast, highlighting persistent economic vulnerabilities and a continuous decline in investment and productivity levels. Ayhan Kose, deputy chief economist at the World Bank Group, emphasized these concerns during a conversation with Anadolu.
According to Anadolu Agency, Kose pointed out that global economic policy uncertainty has reached unprecedented levels, compounded by increasing geopolitical tensions. The bank has adjusted its growth forecast for 2025 from 2.7% to 2.3%, underscoring the urgency for long-term structural reforms.
Kose noted a significant decline in global growth over the past 25 years, with figures dropping from an average of 5% in the early 2000s to 3.5% today. He attributed this trend to weakening investment and slower population growth, leading to reduced productivity and lower growth rates.
Investment levels, both foreign and domestic, have seen a 'significant decline,' particularly in developing countries. Kose cited global and domestic factors such as ongoing trade tensions, rising geopolitical risks, and high policy uncertainty as contributing factors.
He stressed the importance of policy action to sustain growth, yet acknowledged the waning political momentum for reform since the early 2000s. Kose highlighted the necessity of strengthening institutions and establishing sound fiscal policies and price controls to attract foreign and private capital.
Kose also addressed the escalating trade tensions between major powers like the US and China, which are impacting global trade dynamics. Despite these tensions, countries are increasingly pursuing new trade agreements to expand markets and attract investment.
The World Bank expects global inflation to decline more noticeably in 2026, although the anticipated reduction this year may be delayed. Kose emphasized the importance of central banks taking proactive measures to meet inflation targets and clearly communicating their policies to anchor public expectations.
He also warned of potential upward pressure on global energy prices due to rising tensions in the Middle East, urging a close watch on how these developments affect oil reserves and production.
Despite the uncertainties, Kose expressed cautious optimism about the global economy's outlook. He highlighted the resilience shown by the global economy amid significant challenges over the past five years and called for serious and credible economic policies to strengthen growth prospects.
Kose concluded by emphasizing the need for governments to implement robust economic strategies to foster hope and optimism, even as growth forecasts remain subdued.