World Bank Chief Economist Highlights Global Economic Concerns; US and India Stand as Positive Exceptions

World Bank Chief Economist Highlights Global Economic Concerns; US and India Stand as Positive Exceptions

Ira Singh
13 Oct’23

The World Bank’s Chief Economist, Indermit Gill has expressed concerns about the weakening global economy, highlighting the US and India as relative bright spots in the midst of global economic challenges.

According to a Moneycontrol report Gill noted, “The good news is that there are a few bright spots like the US and India.” These comments were made during a press conference on October 11, held before the annual meeting of the World Bank Group and the International Monetary Fund (IMF) in Marrakesh, Morocco.

Gill’s remarks came just days after the World Bank maintained its growth forecast for India at 6.3 percent for 2023-24, despite persistent global headwinds. The IMF had also recently raised its growth forecast for India’s current financial year by 20 basis points to 6.3 percent. The Reserve Bank of India (RBI)had projected a GDP growth rate of 6.5 percent for 2023-24 and 2024-25. High-interest rates, however, pose a significant challenge to global growth, according to Gill. Moneycontrol reported that he expressed concerns about the impact of high interest rates, explaining that growth was slowing down significantly. He further noted that the main issue was that growth was decelerating to levels considerably below those observed before the crisis.

Gill emphasised the potential impact of high interest rates by drawing parallels with the 1970s when the US Federal Reserve increased rates, leading to economic difficulties in multiple countries. He cautioned, “We should expect some countries to get into trouble now.”

In the past 18 months, the US Federal Reserve has raised its key interest rate by 500 basis points to combat high inflation caused by global commodity price spikes following the Russia- Ukraine conflict. Gill suggested that while some countries may not have high debt levels now, they could still face issues as public debt crowds out private investment, hampering growth.