Growth of World’s Richest Countries Expected to Slow, Warns World Bank | The independent
Hopes that the wealthiest economies would benefit from a synchronized recovery this year that would lift the world out of its decade-long malaise were dashed by an unfavorable World Bank forecast that slashed its growth prospects in the United States and China. Europe.
Growth in the world’s most advanced economies is expected to slow to 1.4% in 2020, from 1.6% last year, and below its previous forecast of 1.5%.
The economies of the United States, the eurozone and Japan will all experience a slowdown, the bank said on Wednesday.
The US economy will be negatively impacted by the tariffs ordered by Donald Trump as part of his trade war with China, while the industrial recession in the euro zone will be the main drag on the single currency zone.
This will be offset by a “fragile” recovery in growth among emerging markets and developing economies (EMDEs) to 4.1% from 3.5% in 2019, bringing global growth to 2.5% from 2.4. % in 2019 – the lowest since the global financial crisis.
“It has been a decade of disappointment,” said Franziska Ohnsorge, director of the bank’s development outlook group.
But even that meager acceleration depends on the stronger performance of eight countries that suffered severe downturns in 2019.
These include Argentina, Brazil, India, Iran, Mexico, Russia, Saudi Arabia, Turkey which alone represent a third of the economy. EMDE. “The recovery in 2020 is subject to great downside risks,” Ms. Ohnsorge said.
The World Bank also warned that there was a risk of a deeper global slowdown if global trade tensions reappear, if uncertainty over government policies persists, or if wealthy economies experience significant deterioration in growth.
The bank, which predicted a year ago that the UK economy would grow 1.4% as long as a Brexit deal was reached, has stopped publishing forecasts for the UK. Ms Ohnsorge said the UK did not pose a significant enough spillover risk for emerging markets to warrant releasing a forecast.
But she added: ‘There remains a risk that something in the Brexit process – or the transition process now – will go wrong and surprise. [us] and that could then derail growth in the euro zone.
She said a decline in eurozone growth would “spill over” to countries in Eastern Europe, the Middle East, North Africa and sub-Saharan Africa.
The bank urged countries to take measures to improve their business climate, rule of law and debt management in order to achieve sustained growth.
“With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that spur widespread growth, which is essential for poverty reduction,” said Ceyla Pazarbasioglu , vice president of the bank for equitable growth, finance and institutions.
In a separate chapter, the bank warned that the accumulation of debt by rich and poor economies since 2010, which now stands at a record $ 130 trillion or 264% of GDP, has increased the risk of a financial crisis.
While current low levels of interest rates mitigate some of the risks associated with high debt, previous waves of large-scale debt accumulation have ended in widespread financial crises, he said.