The global economy is getting weaker, but the US and India are bright spots in an arena where high interest rates are dragging growth lower, Indermit Gill, World Bank chief economist, said on Wednesday.
“The World Bank is getting stronger and the world economy is getting weaker. The good news is that there are a few bright spots, like the US and India. The other good news is that in spite of all of these shocks, we have not seen any big economy really get into trouble. But the good news basically ends there,” Gill said.
“The trouble now is that because of the high interest rates, growth is slowing down a lot. The big problem is that growth is slowing down to levels that are much lower than what we had seen before the crisis,” he added.
Gill, along with Ajay Banga, World Bank president, were addressing the media in Marrakesh, Morocco ahead of the start of the annual meeting of the World Bank Group and the IMF.
He further warned that the possible impact of high interest rates could best be understood by looking at what happened in the 1970s when the US Federal Reserve raised rates.
“There are two or three things to think about. The first one is that it took a long time, it didn’t take one or two years. So we should expect this tightening cycle to also take long. The second one is at that time, it left about 24 economies bankrupt,” Gill said.
“And we should expect some countries to get into trouble now,” he warned.
It is worth noting here that last week, the World Bank projected India’s GDP to grow at 6.3% in FY24, at 6.4% in FY25 and 6.5 in FY26.
It foresees fiscal consolidation continuing into FY24, with the central government’s fiscal deficit expected to decline from 6.4% to 5.9% of the GDP.
“Public debt is projected to stabilize at 83% of the GDP. On the external front, the current account deficit is likely to narrow to 1.4% of the GDP and will be adequately financed by flows of foreign investment, bolstered by large foreign reserves,” the World Bank elaborated.