The global slowdown has settled in and prospects for growth are falling further.
This week the World Bank revised the global growth forecast down again to 2.4% from the 2.9% January prediction because growth is still sluggish in major economies, commodity prices are “stubbornly” low, trade is weak and capital flows are diminishing.
“In an environment of anemic growth, the global economy faces pronounced risks, including a further slowdown in major emerging markets, sharp changes in financial market sentiment, stagnation in advanced economies, a longer-than-expected period of low commodity prices, geopolitical risks in different parts of the world, and concerns about the effectiveness of monetary policy in spurring stronger growth,” the World Bank noted.
Too-low commodity prices have hit emerging and developing economies that export heavily hardest, and growth among them will be 0.4%, a 1.2 percentage-point slide from January’s projections.
“This sluggish growth underscores why it’s critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty,” World Bank group president Jim Yong Kim said.
China, which has seen 30-year-low economic growth, will likely see growth continue to slip. Last year, China’s economic growth rang in at 6.9%, and this year World Bank forecasts a lower 6.7%.
India’s robust expansion will stay its course at 7.6% and Brazil and Russia will be in deeper recessions than previously forecast.
“As advanced economies struggle to gain traction, most economies in South and East Asia are growing solidly, as are commodity-importing emerging economies around the world, World Bank chief economist and senior vice president Kaushik Basu said.
Growth in East Asia and the Pacific will slow to 6.3% though the projection remains unchanged from January. China excluded, the region’s growth will be flat to last year.
Russia will weigh on growth in the Europe and Central Asia region, with projections 0.4 percentage points down to 1.2%. With Russia out of the mix, the region is expected to see 2.9% growth.
Latin America and the Caribbean will fare a bit worse, with growth contracting by 1.3% this year after a 0.7% slide in 2015, the first consecutive years of recession in more than 30 years, according to the World Bank. Brazil’s economy will contract 4 percent this year and the recession will likely leak into 2017 as the country looks to tighten policies and combat rising unemployment, shrinking incomes and political uncertainty.
On a more positive note, growth in South Asia is expected to jump 7.1% this year despite worse-than-expected growth in advanced economies, which tapered export growth in the region.
“India, the region’s largest economy, showed strengthening activity, as did Pakistan, Bangladesh and Bhutan,” World Bank said. “Most South Asian economies have benefitted from the decline in oil prices, low inflation, and steady remittance flows.”
Though efforts to source in Sub-Saharan Africa have ramped up in recent years, growth in the region will slow to 2.5% this year from 3 percent last year because commodity prices will still be low and global activity will be weak. Investment growth will be slow, too, as governments or investors cut or hold back capital spend in favor of fiscal consolidation.