The World Bank has raised an intriguing possibility regarding the United States economy, suggesting that its underlying growth potential might be stronger than current estimates indicate. This assessment comes from the institution's deputy chief economist, Ayhan Kose, who highlighted the economy's unexpected resilience in the face of multiple global shocks.
Reassessing the Economic Speed Limit
In a recent interview, Kose pointed to the U.S. recording another year of surprisingly robust growth, which prompts a reevaluation of the potential growth rate. This key metric represents the pace at which an economy can expand using all available resources without triggering inflationary pressures. "We need to increasingly think whether the economy's potential growth has been increasing," Kose stated, emphasizing the significance of this shift for policymakers worldwide.
The World Bank estimates that the U.S. economy expanded by 2.1% in 2025. This performance brings the average growth rate since 2022 to 2.6%, notably higher than the 2.2% average recorded in the decade through 2020. It is important to note that this comparison excludes the exceptional 6.2% growth in 2021, which represented a rebound from COVID-19 related shutdowns.
Implications for Policy and Global Economy
The potential growth rate serves as the economy's speed limit, providing crucial guidance for policymakers. It helps determine whether inflationary pressures are likely to emerge and offers insights into future tax revenue performance. Currently, the Congressional Budget Office estimates this rate at 1.8%. However, a higher potential growth rate would indicate that the economy can expand more rapidly without necessitating interest rate hikes by the Federal Reserve. Additionally, it suggests that budget deficits might be smaller than previously forecast.
Kose elaborated on the factors that could be driving this potential shift: "Given the investment boom, given year after year of supportive fiscal policy, and of course if you look at productivity numbers improving, you can make a case that there is a level change in potential growth, maybe it's now 2.2%, maybe it's 2.4%."
Diverging Views on U.S. Economic Momentum
While the World Bank projects the U.S. economy to grow by 2.2% this year, other institutions offer more optimistic forecasts. BNP Paribas, for instance, expects the world's largest economy to expand by 2.9%. Isabelle Mateos y Lago, the French bank's chief economist, noted, "We see a lot of momentum in the U.S. economy."
However, BNP Paribas currently views the productivity pickup observed in 2025 as likely temporary, attributing it to subdued hiring during periods of uncertainty. Yet, there remains a possibility that this increase in productivity is sustained and not confined to the United States. Mateos y Lago acknowledged, "It is possible this step-increase in productivity is sustained and not limited to the U.S."
Global Implications and Technological Impact
The International Monetary Fund estimates that the application of new technologies, including artificial intelligence, could boost global growth by between 0.1 and 0.8 percentage points annually over the medium term. IMF Managing Director Kristalina Georgieva described the upper end of this range as "big," noting that it could lift global growth above pre-pandemic levels if realized.
A faster-growing and more resilient U.S. economy would provide a significant boost to the global economic landscape. It would increase demand for goods and services produced elsewhere, even as higher tariff rates might partially suppress this effect. Kose emphasized, "That has huge implications for the global economy. You basically have this largest economy doing very well despite the fact that it has been buffeted by a number of shocks. That also helps the global economy."
The Challenge of Global Economic Divergence
Despite the positive signals from the U.S. economy, the global economic picture remains uneven. In contrast to the performance of the United States, India, and a few other nations, growth in many regions has been weaker than before the COVID-19 pandemic. This is particularly evident in poorer parts of the world.
By the end of last year, per capita incomes in nearly all advanced economies had surpassed their 2019 levels. However, the World Bank estimates that incomes in one out of four developing countries had yet to recover to their pre-pandemic levels. Kose observed, "There is this great recovery, but there is this great divergence as well."
A major concern for the World Bank is that slower-growing countries often have rising populations of young people who will need employment opportunities over the coming decade. Kose warned, "This is a very serious threat to the stability of those economies," highlighting the urgent need for inclusive growth strategies.
