World Economy

Global Economy Surging, But Growth Could Stall

Global Economy Surging, But Growth Could Stall
Global Economy Surging, But Growth Could Stall

Almost a decade after the financial crisis, economies in just about every corner of the world—the United States, Europe and Japan—are growing in unison. But can the expansion last?

Many economists predict it will—at least into this year. But they also fret that unresolved problems embedded in the global economy, including income inequality and stagnant productivity, could hamper further gains and stall growth once again, news outlets reported.

“We will see the momentum created by the recovery continuing into 2018,” said Shanta Devarajan, senior director for development economics at the World Bank. “But the biggest question is how sustainable that is going to be. That is what we are mostly concerned about.”

In a report earlier this month, the World Bank said it expects the global economy to grow by a stronger than expected 3.1% this year as more than half of the economies accelerated.

Since its last report in June, the World Bank has upgraded nearly all of its forecasts. The brighter outlook comes as “the global economy is experiencing a cyclical recovery, reflecting a rebound in investment, manufacturing activity and trade”, the report said, according to CNBC.

This means 2018 is on track to be the first year since the financial crisis that the global economy will be operating at or near full capacity, the World Bank noted. It expects growth to hit 3% next year.

While the world’s advanced nations are expected to slow marginally, the World Bank projects emerging economies will gain speed, with 4.5% growth this year compared with an estimated 4.3% in 2017.

Separately, the International Monetary Fund forecast in October that the world economy will grow 3.7% this year, the fastest pace since 2011. It will update its forecasts at the Davos gathering of world leaders later this month.

The robust rebound has been a long time coming. Year after painful year after the Great Recession, policymakers and economists anticipated a stronger recovery that never came. Some economists speculated that the global economy had sunk into long-term stagnation. Bouts of turmoil, including debt woes that threatened the eurozone and financial panics in some emerging markets, added to the gloom.

Some key regions of the world are already expected to slow this year, including the eurozone and Japan. China, the world’s second-largest economy, could lose steam, too. The government announced this month that growth reached 6.9% in 2017, but economists generally don’t expect the economy to maintain that pace. The World Bank predicts a 6.4% expansion this year.

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