World Bank Predicts slower Global Economy Growth

Despite recent softening, global economic growth is set to remain robust at 3.1 percent in 2018 before slowing gradually over the next two years.

This comes as advanced-economy growth decelerates and the recovery in major commodity-exporting emerging market and developing economies levels off.  

According to World Banks’s June 2018 Global Economic Prospects report, activity in advanced economies is expected to grow 2.2 percent in 2018 before easing to a 2 percent rate of expansion next year, as central banks gradually remove monetary stimulus.

Growth in emerging market and developing economies overall is projected to strengthen to 4.5 percent in 2018, before reaching 4.7 percent in 2019 as the recovery in commodity exporters matures and commodity prices level off following this year’s increase.  

World Bank Group President Jim Yong Kim noted that if the prospects can be sustained, the robust economic growth that has been seen this year could help lift millions out of poverty, particularly in the fast-growing economies of South Asia. 

“But growth alone won’t be enough to address pockets of extreme poverty in other parts of the world. Policymakers need to focus on ways to support growth over the longer run—by boosting productivity and labor force participation—in order to accelerate progress toward ending poverty and boosting shared prosperity,” said Jim Yong Kim

This outlook is subject to considerable downside risks. The possibility of disorderly financial market volatility has increased, and the vulnerability of some emerging market and developing economies to such disruption has risen. Trade protectionist sentiment has also mounted, while policy uncertainty and geopolitical risks remain elevated.

A Special Focus cautions that, over the long run, the anticipated slowdown in global commodity demand could put a cap on commodity price prospects and thus on future growth in commodity-exporting countries. Major emerging markets have accounted for a substantial share of the increase in global consumption of metals and energy over the past two decades, but growth of their demand for most commodities is expected to decelerate, the Special Focus section says.

Another Special Focus finds that elevated corporate debt can heighten financial stability concerns and weigh on investment. Corporate debt—and, in some countries, foreign currency debt—has risen rapidly since the global financial crisis, making them more vulnerable to rising borrowing costs.

After many years of downgrades, consensus forecasts for long-term growth have stabilized, a possible signal the global economy is finally emerging from the shadow of the financial crisis a decade ago. However, long-term consensus forecasts are historically overly optimistic and may have overlooked weakening potential growth and structural drags on economic activity, the report cautions. 

The report urges policymakers to implement reforms that lift long-term growth prospects. A rapidly changing technological landscape highlights the importance of supporting skill acquisition and boosting competitiveness and trade openness. Improving basic numeracy and literacy could yield substantial development dividends. Finally, promoting comprehensive trade agreements can bolster growth prospects. 

Growth in the Sub-Saharan Africa region is projected to strengthen to 3.1 percent in 2018 and to 3.5 percent in 2019, below its long-term average.

Nigeria is anticipated to grow by 2.1 percent this year, as non-oil sector growth remains subdued due to low investment, and at a 2.2 percent pace next year. Angola is expected to grow by 1.7 percent in 2018 and 2.2 percent in 2019, reflecting an increased availability of foreign exchange due to higher oil prices, rising natural gas production, and improved business sentiment. South Africa is forecast to expand 1.4 percent in 2018 and 1.8 percent in 2019 as a pickup in business and consumer confidence supports stronger growth in investment and consumption expenditures.

Rising mining output and stable metals prices are anticipated to boost activity in metals exporters. Growth in non-resource-intensive countries is expected to remain robust, supported by improving agricultural conditions and infrastructure investment