WASHINGTON (AP) — The World Bank said the global economy should see a modest rebound in growth this year.
But the 189-nation lending institution is cautioning that a number of risks could upend its forecast, including the possibility of renewed trade hostilities between the world’s two biggest economies, the United States (US) and China.
In an updated economic outlook released on Wednesday, the World Bank forecast the global economy will grow 2.5 per cent this year, up only slightly from 2.4 per cent growth in 2019. That had been the weakest performance since the 2008 financial crisis and a significant slowdown from growth rates above three per cent in 2017 and 2018.
The bank’s revised outlook represents a downgrade from its last forecast in June when it had expected growth to be 0.2 percentage-points higher this year.
The forecast also trimmed its expectation for global growth by 0.2 percentage points over the next two years to moderate rates of 2.6 per cent in 2021 and 2.7 per cent in 2022. “Downside risks persist. The recovery is fragile,” said World Bank Vice President Ceyla Pazarbasioglu. “Uncertainty has weighed on confidence, trade and investment which are all critical for growth.” For the US, the World Bank sees gross domestic product growth slowing from 2.3 per cent in 2019 to 1.8 per cent in 2020 and then slowing further to 1.7 per cent in both 2021 and 2022.
Those growth rates are significantly below the three per cent-plus growth President Donald Trump has promised to deliver with his economic program of tax cuts and deregulation.
For Europe, the World Bank has an even gloomier outlook. Last year’s minuscule 1.1 per cent growth is expected to be followed by further scant gains of one per cent this year and 1.3 per cent in both 2021 and 2022.
The new forecast projects China, the world’s second largest economy, will grow at steadily slower rates of 5.9 per cent this year, 5.8 per cent next year and 5.7 per cent in 2022. That would mark the slowest growth period for China since the early 1990s.
Economic growth in both China and the US has been impacted by the uncertainty generated by the punitive tariffs both countries have imposed on each other’s goods.
Growth for all advanced economies is expected to slip to 1.4 per cent this year, down from 1.8 per cent last year, reflecting continued softness in manufacturing in many parts of the world that has caused businesses to pull back on their plans to expand and modernise production facilities.
Growth in emerging economies is expected to accelerate to 4.1 per cent this year, but the acceleration will not be broad based.
A rebound is forecast for a group of larger economies — including Argentina, Brazil and India — which are expected to recover this year after a period of substantial weakness.
But the forecast expects growth in about one-third of emerging market economies to slow this year due to weaker-than-expected exports and investment.
Trump’s get-tough trade policies aimed at lowering America’s huge trade deficits as a way to boost US manufacturing jobs have resulted in an increase in protectionist barriers in the US and many other nations.
The World Bank estimated that global trade growth slowed from four per cent in 2018 to just 1.4 per cent last year, the weakest gain since the 2008 financial crisis.
The World Bank, however, noted the lowering of trade tensions between the US and China after a so-called Phase One agreement was reached between the two nations.
It forecast that trade should resume growth this year, although the projected trade growth of 1.9 per cent would still be far below the five per cent average gains in recent years. Among other threats to growth, the World Bank cited weak productivity gains in many countries and a sharp rise in global debt burdens.