But advanced economies are improving too. Growth in advanced economies is expected to accelerate to 1.9% in 2017, according to the World Bank.
Europe has experienced strong growth, and growth in the United States is expected to recover in 2017 and to continue at a moderate pace in 2018. Japan also saw robust growth at the start of 2017.
A fragile recovery
However, the World Bank warns that the recovery in the global economy is fragile.
New trade restrictions – such as those promised by President Donald Trump – could hamper global trade, just as uncertainty over policies could hamper investment.
Mounting public debt is also of concern to the Bank, because it says borrowing conditions – such as interest rates – could get tougher, which would affect countries’ economies.
Global government debt has risen by 12% of GDP since 2007, to 47% of GDP by 2016.
At the end of 2016, government debt exceeded its 2007 level by more than 10% of GDP in more than half of emerging market and developing economies. Fiscal balances – the ability of a country to cope with increases in costs of financing – worsened from their 2007 levels by more than 5% of GDP in one-third of these countries, says the Bank.
The Bank says that countries now need to undertake institutional and market reforms in order to attract private investment. This will help sustain growth in the long-term.
“The reassuring news is that trade is recovering,” said World Bank Chief Economist Paul Romer.
“The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector.”
The pitfalls of using GDP
GDP has been has been widely used over the years to measure economic progress. But many argue that it’s not a useful indicator. Nobel Prize winning economist Joseph Stiglitz, IMF head Christine Lagarde and MIT professor Erik Brynjolfsson have all said GDP is a poor indicator of progress, and argued for a change to the way we measure economic and social development.