World Bank slashes global growth fore­cast to 2.4pc

Pakistan Observer - - EONOMIC WATCH -

WAHINGTON—Global growth will fall to just 2.4 per cent this year, as the world economy is dragged down by weak ad­vanc­ing economies, per­sis­tently low com­mod­ity prices and sub­dued global trade, ac­cord­ing to the World Bank. In its lat­est health check on the global economy, the Bank de­liv­ered a sub­stan­tial down­grade to global GDP, from an ear­lier fore­cast of 2.9 per cent made in Jan­uary, and warned of the threat of ris­ing pri­vate debt lev­els in the emerg­ing world. Half of the down­ward re­vi­sion is due to the still slug­gish pace of eco­nomic ex­pan­sion in de­vel­oped economies and com­mod­ity ex­port­ing na­tions, who “have strug­gled to adapt to lower prices for oil and other key com­modi­ties”, said the World Bank.

GDP in these coun­tries is set to amount to just 0.4 per cent in 2016, three times lower than the 1.2 per cent the in­sti­tu­tion cal­cu­lated at the start of the year. Warn­ing that the pos­i­tive ef­fects of lower com­mod­ity prices have been slow to ma­te­ri­alise, the re­port said that even re­silient de­vel­op­ing na­tions and com­mod­ity im­porters would see a slow­down in 2016. They are fore­cast to ex­pand by 5.6 per cent, com­pared to an ear­lier es­ti­mate of 5.9 per cent in 2016. The Bank’s fore­cast is made on oil prices around $41 a bar­rel.

Ris­ing lev­els of pri­vate sec­tor credit growth fu­eled by record low cen­tral bank in­ter­est rates – also threaten to scup­per the eco­nomic health of the de­vel­op­ing world, said the re­port. India will be the fastest grow­ing of the world’s ma­jor economies, ex­pand­ing by 7.6 per cent, while Chi­nese ex­pan­sion will mod­er­ate to 6.7 per cent from 6.9 per cent last year.

Cri­sis-rav­aged Brazil will re­main mired in a “deeper re­ces­sion than fore­cast” at -4 per cent. As a whole, Latin Amer­ica will con­tract by 1.3 per cent af­ter a 0.5 per cent de­cline in 2015, mark­ing the first con­sec­u­tive years of re­ces­sion for the con­ti­nent in more than 30 years. The Mid­dle East and North Africa re­ceived the largest down­grade of any re­gion as low oil prices will drag down GDP ex­pan­sion to 2.9 per cent, down 1.1 per cent from the Jan­uary es­ti­mate.

Jim Yong Kim, pres­i­dent of the World Bank, en­cour­aged global gov­ern­ments to “pur­sue poli­cies that boost eco­nomic growth and im­prove the lives of those liv­ing in ex­treme poverty”, adding: Eco­nomic growth re­mains the most im­por­tant driver of poverty re­duc­tion, and that’s why we’re very con­cerned that growth is slow­ing sharply in com­mod­ity-ex­port­ing de­vel­op­ing coun­tries due to de­pressed com­mod­ity prices.—Agen­cies

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