Fri, Jan 10, 2020 - Page 10 News List

World Bank trims growth forecast for this year

SLOW RECOVERY:World Bank officials said they could not estimate the growth effects of a wider US-Iran conflict, adding that this would increase uncertainty


The World Bank on Wednesday trimmed its global growth forecasts slightly for last year and this year due to a slower-than-expected recovery in trade and investment, despite cooler trade tensions between the US and China.

Last year marked the weakest economic expansion since the global financial crisis a decade ago, the multilateral development bank said, adding that this year, while a slight improvement, remains vulnerable to uncertainties over trade and geopolitical tensions.

In its latest Global Economic Prospects report, the World Bank shaved 0.2 percentage points off of growth for each year, with last year’s global economic growth forecast at 2.4 percent and this year’s at 2.5 percent.

“This modest increase in global growth marks the end of the slowdown that started in 2018 and took a heavy toll on global activity, trade and investment, especially last year,” said World Bank economist Ayhan Kose, who oversaw the report. “We do expect an improvement, but overall, we also see a weaker growth outlook.”

The latest World Bank forecasts take into account the so-called “phase 1” trade deal announced by the US and China, which suspended new US tariffs on Chinese consumer goods scheduled for Dec. 15 and reduced the tariff rate on some other goods.

While the reduction of tariff rates would have a “rather small” effect on trade, the deal is expected to boost confidence and investment prospects, contributing to a pickup in trade growth, Kose said.

Global trade growth this year is expected to improve modestly to 1.9 percent from 1.4 percent last year — the lowest since the 2008-2009 financial crisis, the World Bank said, adding that this is well below 5 percent, the average annual trade growth rate since 2010.

However, both trade and overall economic growth prospects remain vulnerable to flare-ups in US-China trade tensions, as well as rising geopolitical tensions.

World Bank officials said that they could not estimate the growth effects of a wider US-Iran conflict, adding that this would increase uncertainty, which would hurt investment prospects.

Growth in the US, the eurozone and Japan this year is expected to decline slightly to 1.4 percent from 1.6 percent last year — a markdown of 0.1 percentage points for each year — due to continued softness in manufacturing, and the lingering negative effects of US tariffs and retaliatory measures.

Emerging market economies this year are expected to see a pickup in growth to 4.3 percent from 4.1 percent last year, although these are both a half-percentage-point lower than forecasts made in June last year.

China’s growth rate this year is projected to decelerate to 5.9 percent in 2020, a reduction of 0.2 percentage points from the June forecast.

However, China has sufficient policy buffers to cushion any deeper slowdown, Kose said.

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