The World Bank on Tuesday lowered its global growth forecast for 2019 to 2.6 per cent, citing growing trade tensions, among other factors, according to the newly released semi-annual Global Economic Prospects report.
“Heightened policy uncertainty, including a recent re-escalation of trade tensions between major economies, has been accompanied by a deceleration in global investment and a decline in confidence,” the report said.
Global gross domestic product (GDP) growth in 2019 was downgraded to a “weaker-than-expected” 2.6 per cent, 0.3 percentage point below a previous estimate in January, the report said. Global growth is projected to inch up to 2.7 per cent in 2020.
World Bank President David Malpass told reporters in a teleconference that global growth has weakened since the January issue of the report, and “momentum remains fragile.”
“The global economic outlook, in both the near- and long-term, is confronting substantial challenges,” Malpass said, noting that downside risks to growth include rising trade barriers, a buildup of government debt, and deepening slowdowns in major economies.
Global trade growth in 2019, in particular, was revised down a full percentage point, to 2.6 per cent, the weakest since the global financial crisis, the report said.
Ayhan Kose, director of the prospects group at the World Bank, said in the teleconference that if trade tensions escalate and much higher tariffs are put on “a very large segment” of global trade, “it is very likely that we will see a deeper slowdown.”
“The slowdown will take place in major economies, will have a significant spillover through trade channels, through confidence channels, through commodity markets,” Kose said, noting that the current 2.7 percent forecast for global growth in 2020 could be cut by a full percentage point to 1.7 per cent if trade tensions worsen.
If there is “an improvement” in the trade disputes, it will help boost confidence, reduce uncertainty and “put a floor” on the slowdown, Kose said. “This is a path that policymakers can take and can lead to a much better prospect for global economic growth.”
In the report, growth among emerging market and developing economies is projected to fall to a four-year low of 4 per cent in 2019, as a number of economies are coping with the impact of financial stress and political uncertainty. Growth is forecast to recover to 4.6 per cent in 2020.
The World Bank maintained its growth projection for China this year at 6.2 per cent, citing “a deceleration in global trade, stable commodity prices, supportive global financial conditions, and the ability of authorities to calibrate supportive monetary and fiscal policies to address external challenges and other headwinds.”
Growth among advanced economies, meanwhile, is anticipated to slow to 1.7 per cent in 2019, with the euro area growth projected at 1.2 per cent, the report said. The U.S. growth is forecast to ease to 2.5 per cent this year, and decelerate to 1.7 per cent in 2020.
“Governments also need to make debt management and transparency a high priority so that new debt adds to growth and investment,” Malpass said.
Ceyla Pazarbasioglu, World Bank vice president for equitable growth, finance and Institutions, said in a press release that “while almost every economy faces headwinds, the poorest countries face the most daunting challenges because of fragility, geographic isolation, and entrenched poverty”.
“Unless they can get onto a faster growth trajectory, the goal of lowering extreme poverty under 3 percent by 2030 will remain unreachable,” Pazarbasioglu said. (UNI)