The global economy will expand by 2.6% this year, driven by the strength of sustained growth in the United States, the World Bank said on Tuesday as it boosted its forecasts but warned that overall output would remain well below pre-pandemic levels through 2026.

The latest outlook marks an increase from the 2.4% growth for 2024 the bank had predicted in January. And it would match the 2.6% expansion in 2023, meaning that the global economy would avoid a third consecutive drop in real GDP growth since a major post-pandemic jump in 2021.

But the agency cautioned that global growth remains sluggish by past standards, that the poorest countries are struggling under the weight of heavy debts and high interest rates and that increased trade barriers endanger prosperity worldwide. The brutal wars in Ukraine and Gaza are inflicting further pressures on regional economies.

Stronger-than-expected growth in the United States – the world’s biggest economy – accounted for 80% of the World Bank's upgraded outlook. The agency now expects the U.S. economy to expand 2.5% in 2024, the same as in 2023 but up sharply from the 1.6% the bank had predicted in January.

"In a sense, we see the runway for a soft landing," Ayhan Köse, the bank’s deputy chief economist, told Reuters in an interview, noting that sharply higher interest rates have brought down inflation without major job losses and other disruptions in the U.S. or other major economies.

"That's the good news. What is not good news is that we may be stuck in the slow lane," Köse added.

"U.S. growth is exceptional,’’ Köse separately told The Associated Press (AP) ahead of the release of its latest Global Economic Prospects report.

Made up of 189 member nations, the World Bank seeks to reduce poverty and boost living standards by providing grants and low-rate loans to developing economies.

The World Bank forecast global growth of 2.7% in both 2025 and 2026, a level well below the 3.1% global average in the decade prior to COVID-19.

It also is forecasting that interest rates in the next three years will remain double their 2000-2019 average, keeping a brake on growth and adding debt pressure to emerging market countries that have borrowed in dollars.

From January through March, the U.S. economy expanded at just a 1.3% annual rate, the slowest pace in nearly two years, and Köse said the World Bank forecast took the first-quarter slowdown into account.

The pullback was due largely to factors that economists view as temporary: A surge in imports and a reduction in business inventories. By contrast, the core components of economic growth – consumer spending and business investment – remained solid in the first three months of the year.

The global and especially the U.S. economies have proved unexpectedly resilient in the face of high interest rates engineered by the Federal Reserve (Fed) and other central banks to curb the high inflation that flared up in 2021.

But even after the World Bank’s upgrade, global growth looks sluggish – a half percentage point below the 2010-2019 average. Inflation has cooled significantly – from 7.2% in 2022 to 4.9% last year to a forecast of 3.5% in 2024 – but remains above where central banks want it. That means central bank policymakers may be cautious about reducing rates from today’s high levels.

That approach, though, carries risks of its own, notably the danger that high borrowing rates will cause economic growth to slow too much.

"There are consequences of keeping interest rates elevated for a longer period," Köse said. "You end up with slower growth. We need to avoid lower-for-longer economic growth around the world.’’

"The world,’’ he warned, "might become stuck in the slow lane.’’

Many countries are already under strain.

The World Bank expects emerging markets and developing countries to collectively grow 4% this year, down from 4.2% in 2023. In many cases, their populations are outpacing their economies, reducing their annual income growth per person to 3% this year through 2026 – far below the average 3.8% in the decade before the pandemic struck.

China, the world’s second-largest economy after the United States, is struggling with the collapse of its real estate market and with weak consumer confidence. The Chinese economy is expected to decelerate to 4.8% this year from 5.2% in 2023.

Growth in Latin America is forecast to slow from 2.2% last year to 1.8% in 2024. The World Bank expects the economy of sub-Saharan Africa to grow 3.5%, modest but up from 3% last year.

The 20 European countries that share the euro currency, hurt by the consequences of Russia’s war against Ukraine, are expected to eke out 0.7% growth in 2024, though that would be nearly twice their 0.4% growth in 2023.

The World Bank expects Japan’s economic growth, hobbled by sluggish consumer spending and flagging exports, to slow to 0.7% this year from 1.9% in 2023.

Countries around the world last year imposed a record number of measures to restrict trade, partly a consequence of geopolitical tensions, especially between the United States and China. Measured by volume, world trade barely grew last year – 0.1% –and is forecast to expand by a still-meager 2.5% in 2024.

The World Bank says it worries that faltering trade will hold back global growth.

"We would like to solve those problems," Köse said, "by talking to each other and finding common ground," rather than by erecting barriers to trade.