Surprisingly Strong US Economy Is Powering Global Growth: World Bank

Surprisingly Strong US Economy Is Powering Global Growth: World Bank

By Yuval Rosenberg and Michael Rainey
Tuesday, June 11, 2024

Happy Tuesday! On this date in 1776, the Continental Congress formed a committee to draft a Declaration of Independence from Britain. On that panel were John Adams, Benjamin Franklin, Thomas Jefferson, Robert Livingston and Roger Sherman. Jefferson later wrote that the other members of the committee “unanimously pressed on myself alone to undertake the draught. I consented; I drew it; but before I reported it to the committee I communicated it separately to Dr. Franklin and Mr. Adams requesting their corrections. … I then wrote a fair copy, reported it to the committee, and from them, unaltered to the Congress.”

We don’t believe anything quite so historic happened today, but here’s what we were tracking.

Surprisingly Strong US Economy Is Powering Global Growth: World Bank

The World Bank raised its outlook for the current year, saying that a strong U.S. economy will help lift the global growth rate to 2.6%, up from a previous estimate of 2.4% and matching the growth level achieved in 2023. Growth is projected to edge higher in 2025, rising to a 2.7% rate.

In a forward to the updated 2024 outlook, World Bank chief economist Indermit Gill said global economic growth is holding steady this year following a three-year decline, with inflation hitting a three-year low and financial conditions improving. “The world economy, in short, appears to be in final approach for a ‘soft landing,’” he wrote.

Gill called out the U.S. economy for showing “impressive resilience,” despite the tighter monetary conditions imposed by the Federal Reserve in its effort to control inflation. “U.S. dynamism, in fact, is one reason the global economy enjoys some upside potential over the next two years,” he said.

U.S. growth is projected to come in at 2.5% this year, then ease to 1.8% in 2025. The estimate for 2024 has been raised by 0.9 percentage points, based in part on stronger-than-expected consumer spending. The projected slowdown next year is driven by tighter monetary conditions, slower spending growth and falling savings.

Other countries doing exceptionally well include India and Indonesia. The World Bank expects the Indian economy to grow at a rate of 6.7% a year for the next three years, driven by strong domestic demand and investment. With a growing middle class, Indonesia is projected to grow at a rate of 5.1% per year for the next two years.

At the same time, the bank cautioned that some developing economies have not fully recovered from the pandemic. “By the end of this year, one in four developing economies will be poorer than it was on the eve of the pandemic,” Gill said. “By 2026, countries that are home to more than 80 percent of the world’s population would still be growing more slowly, on average, than they were in the decade before COVID-19.”

Gill called on nations to maintain policies that promote productivity and innovation, and to work together to raise growth rates. Increasing trade barriers could hinder that effort, and threaten to widen the gap between developing and nations.

Ayhan Kose, deputy chief economist at the World Bank, told the Associated Press that a reduction in trade driven by political tensions could act as a major brake on global growth. “The world might become stuck in the slow lane,” he said.

Column of the Day: Trump’s Planned End Run Around Congress

As we’ve written several times lately, Republicans are already planning some big tax and spending policy changes for a potential second Trump term as president. The Washington Post’s Catherine Rampell writes that those plans include seizing budget powers that the Constitution gives to Congress:

“In recent months, Trump has said explicitly that sometimes he won’t spend money the way Congress — which controls power of the purse, per the Constitution — instructs him to. He and his advisers have described plans to use ‘impoundment,’ a technical term meaning to withhold funds that Congress has appropriated for specific purposes.”

While that might sound appealing to small-government conservatives, Rampell warns that the effect would be more disturbing than just scrimping on spending: “Trump could unilaterally zero out any program he doesn’t like, or whose recipient has angered him, regardless of Congress’s instructions.”

And it would be illegal, as President Richard Nixon found out when he tried to impound spending and was rebuked by the courts.

Read the full column at The Washington Post.

Quote of the Day

"Medical debt makes it more difficult for millions of Americans to be approved for a car loan, a home loan or small business loan, all of which in turn makes it more difficult to just get by, much less get ahead. And that is simply not fair.”

– Vice President Kamala Harris, on a call with reporters Tuesday discussing a new rule proposed by the Biden administration to ban medical debt from credit reports. Harris and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced the plan, which reportedly could take effect next year. The CFPB says it expects the new rule would lead to the approval of about 22,000 safe mortgages every year. The bureau also says that, despite voluntary steps by credit-reporting and credit-scoring companies to stop or reduce the use of medical debt in their assessments, 15 million Americans still have $49 billion in outstanding medical bills in collections appearing in the credit reporting system.

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