Skies darkening over the global economy

  • Skies darkening over the global economy

Skies darkening over the global economy

According to the GEP, the advanced economies are the worst performers, with a growth rate of 2.2 per cent last year that is forecast to steadily fall to 2 per cent this year, and to 1.6 per cent and 1.5 per cent in the next two years.

Growth will probably increase to 1.7% in 2020 and 1.8% in 2021, it says.

It warns that global growth will slow to 2.9% in 2019, from 3% in 2018 with risks such as softer worldwide trade and investment, elevated trade tensions and substantial financial market pressures in some large emerging market and developing economies.

"Now debt service is eating into government revenues, making it more hard (for governments) to fund essential social services", said World Bank CEO Kristalina Georgieva, who will replace bank president Jim Yong Kim on an interim basis when he leaves at the end of January.

It also noted that the 2018 growth outlook for commodity importers in the East Asia and Pacific, excluding China, "has been downgraded because of a moderation in private consumption amid rising inflation in the Philippines".

China's economy also is slowing amid the trade dispute, and growth should slip to 6.2% this year and next.

The Bank's Global Economic Prospects (GEP) report released on Tuesday kept the forecasts made for India in its June report for the next fiscal year and the 7.3 per cent estimate for the current fiscal year, up from 6.7 per cent recorded in 2017-18.

According to the report, global economic growth is projected to soften from a downwardly revised 3 per cent in 2018 to 2.9 per cent in 2019 amid rising downside risks to the outlook. And if the United States and China slow by a full percentage point, it will cut global growth by almost the same amount, with dire consequences for many countries.

It blamed trade tensions and slowdown in manufacturing for the pessimism.

"Faced with these headwinds, the recovery in emerging market and developing economies has lost momentum".

"How they resolve their differences is going to be very important how global economy is going to shape this year", said Kose. "While investment continued to strengthen amid the GST harmonisation and a rebound of credit growth, consumption remained the major contributor to growth", the World Bank said.

"When growth softens, we are likely to see either stalling or even reversal of poverty reduction".

Sought for further explanation, World Bank Senior Economist Rong Qian said that the Philippines' robust economic base has shielded itself from external shocks, but still cited external and local risks.

"The sense of urgency has to be there", Kose said.

That is especially true with rising debt levels, as interest rates are moving higher.

The report highlights with concern a big jump in borrowing by the poorest nations, debt that increasingly coming from lenders that unlike the World Bank do not provide concessional terms.