The World Bank on Wednesday slashed its growth forecast for the global economy this year, citing “disappointing” growth in major emerging-market economies like China and Brazil.
The bank cut its forecast made in June last year for global economic expansion by 0.4 percentage points to 2.9 percent, though that is still faster than last year’s sluggish 2.4 percent.
“Simultaneous weakness in most major emerging markets is a concern for achieving the goals of poverty reduction and shared prosperity, because those countries have been powerful contributors to global growth for the past decade,” the World Bank said.
In the middle of a deep economic transition, China should see economic growth slow to 6.7 percent this year from 6.9 percent last year, it said.
The forecast for the world’s second-largest economy this year is 0.3 points lower than six months ago and would mark its weakest performance since 1990.
The bank’s growth revisions are even more drastic for two other big emerging-market economies already in recession: Brazil, down 3.6 points to a 2.5 percent contraction, and Russia, a 1.4-point drop to a 0.7 percent contraction.
Both countries have been hammered by falling prices for commodities such as oil and agriculture products.
“There is greater divergence in performance among emerging economies. Compared to six months ago, risks have increased, particularly those associated with the possibility of a disorderly slowdown in a major emerging economy,” World Bank lead economist Kaushik Basu said.
“A combination of fiscal and central-bank policies can be helpful in mitigating these risks and supporting growth,” Basu said.
Risks to the outlook included financial stress linked to the US Federal Reserve’s launch last month of an interest rate hiking cycle and heightened geopolitical tensions, the bank said in its Global Economic Prospects report.
“The simultaneous slowing of four of the largest emerging markets — Brazil, Russia, China and South Africa — poses the risk of spillover effects for the rest of the world economy,” Basu said. “Global ripples from China’s slowdown are expected to be greatest, but weak growth in Russia sets back activity in other countries in the region.”
Developing countries were expected to expand by 4.8 percent this year, 0.4 points weaker than the prior estimate, the 188-nation institution said.
High-income nations on a whole fared better. The forecast for their growth in GDP was lowered to 2.1 percent, a 0.3 point drop.
Only a 0.1 point dip in GDP was notched for the US, the largest economy, and for the 19-nation eurozone, to 2.7 percent and 1.7 percent respectively.
Hard-hit has been sub-Saharan Africa, where growth stumbled to 3.4 percent last year, its weakest performance since 2009, on falling commodity prices.
However, with commodity prices expected to stabilize this year, growth in the region, home to some of the world’s poorest countries, was expected to pick up to 4.2 percent, the institution said, lowering its June forecast by 0.3 points.
The dimmer picture of the world economy painted by the World Bank’ echoed concerns already expressed by the IMF, which is to update its own economic projections on Jan. 20.
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