World Economy

World Bank Lowers Global Growth to 2.4%

World Bank Lowers Global Growth to 2.4%World Bank Lowers Global Growth to 2.4%

The World Bank is downgrading its 2016 global growth forecast to 2.4% from the 2.9% pace projected in January. The move is due to sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.

According to the latest update of its Global Economic Prospects report, commodity-exporting emerging market and developing economies have struggled to adapt to lower prices for oil and other key commodities, and this accounts for 40% of the downward revision, World Bank reported.

“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,” said World Bank Group President Jim Yong Kim, “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.”

Commodity-importing emerging markets and developing economies have been more resilient than exporters, although the benefits of lower prices for energy and other commodities have been slow to materialize.

Among major emerging market economies, China is forecast to grow at 6.7% in 2016 after 6.9% last year. India’s robust economic expansion is expected to hold steady at 7.6%, while Brazil and Russia are projected to remain in deeper recessions than forecast in January. South Africa is forecast to grow at a 0.6% rate in 2016, 0.8 of a percentage point more slowly than the January forecast.

  East Asia & Pacific

Growth in the East Asia and Pacific region is projected to slow to an unrevised 6.3% rate in 2016. The region excluding China is projected to growth at 4.8% in 2016, unchanged from 2015. Growth in the rest of the region is expected to be supported by rising investment in several large economies (Indonesia, Malaysia, Thailand), and strong consumption supported by low commodity prices (Thailand, the Philippines, Vietnam).

  Europe and Central Asia

The continuing contraction in Russia is keeping the forecast growth rate for the region at 1.2% in 2016, a 0.4 percentage point downward revision from the January outlook. Geopolitical concerns, including flare-ups of violence in eastern Ukraine and the Caucasus and terror attacks in Turkey, weigh on the outlook. Excluding Russia, the region is expected to expand at a 2.9% rate.

  Latin America and the Caribbean

The region is forecast to contract by 1.3% in 2016 after a 0.7% decline in 2015, the first back-to-back years of recession in more than 30 years. It is projected to begin expanding again in 2017, gradually gaining momentum to around 2% in 2018.

Prospects vary across the region: South America is anticipated to contract by 2.8% this year, followed by mild recovery in 2017. In contrast, supported by strong exports, output in the Mexico and Central America sub-region, and the Caribbean, are expected to grow at 2.7% and 2.6% respectively in 2016, and more in 2017 and 2018.

Brazil is forecast to contract 4% in 2016, and its recession is expected to carry over into 2017, amid attempts at policy tightening, rising unemployment, shrinking real incomes and political uncertainty.

  Mideast & North Africa

Growth in the region is forecast to pick up slightly to 2.9% in 2016, 1.1 percentage points less than expected in the January outlook. The downward revision comes as oil prices are expected to track lower for the year, at an average of $41 per barrel.

The main reason for the slight improvement in regional growth in 2016 is an expected strong recovery in the Islamic Republic of Iran following the lifting of sanctions in January. An envisaged upturn in average oil prices in 2017 is projected to support a recovery in regional growth to 3.5% in 2017.

  South Asia

Growth in South Asia is forecast to accelerate to 7.1% in 2016, despite weaker-than-expected growth in advanced economies, which has dampened export growth in the region.

India, the region’s largest economy, showed strengthening activity, as did Pakistan, Bangladesh and Bhutan.

  Sub-Saharan Africa

Growth in Sub-Saharan Africa is forecast to slow again in 2016, to 2.5%, down from an estimated 3.0% in 2015, as commodity prices are expected to remain low, global activity is anticipated to be weak, and financial conditions are tightening.