World Bank slashes global growth forecast to 2.4pc
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