Global economic growth is forecast to edge up to 2.5% this year as investment and trade gradually recover from last year’s significant weakness but downward risks persist, the World Bank says in its January 2020 ‘Global Economic Prospects’ report, published on Wednesday.
Growth among advanced economies, as a group, is anticipated to slip to 1.4% in part owing to continued softness in manufacturing.
Growth in emerging market and developing economies is, however, expected to accelerate to 4.1%, but the World Bank warns that this rebound is not broad-based and instead assumes the improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness.
About a third of emerging market and developing economies are projected to decelerate this year owing to weaker-than-expected exports and investment.
“With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction,” World Bank Group equitable growth, finance and institutions VP Ceyla Pazarbasioglu says.
“Steps to improve the business climate, the rule of law, debt management and productivity can help achieve sustained growth, Pazarbasioglu indicates.
According to the World Bank, growth in the US is forecast to slow to 1.8% this year, which the institution notes reflects the negative impact of earlier tariff increases and elevated uncertainty.
The euro area’s growth is projected to slip to a downwardly revised 1% this year amid weak industrial activity.
“Downside risks to the global outlook predominate and their materialisation could slow growth substantially,” the World Bank laments, adding that these risks include a re-escalation of trade tensions and trade policy uncertainty.
Additionally, a sharper-than-expected downturn in major economies, and financial turmoil in emerging market and developing economies could also pose risks.
Even if the recovery in emerging and developing economy growth takes place as expected, the World Bank notes that per capita growth will remain “well below long-term averages and well below levels to achieve poverty alleviation goals”.
According to World Bank prospects group director Ayhan Kose, the low global interest rates provide only “a precarious protection against financial crises”.
Kose adds that “the history of past waves of debt accumulation shows that these waves tend to have unhappy endings”.
Additionally, he points out that, in a fragile global environment, policy improvements are “critical to minimise the risks associated with the current debt wave”.
AFRICAN OUTLOOK
Sub-Saharan Africa’s growth is expected to improve to 2.9% this year, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pick up in oil production contributes to a recovery in oil exporters and robust growth continues among agricultural commodity exporters.
While the forecast is weaker than previously expected, the World Bank points out that this reflects softer demand from key trading partners, lower commodity prices and adverse domestic developments in several countries.
In South Africa, growth is expected to pick up to 0.9%, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes and investment gradually recovers.
Growth in Nigeria is expected to edge up to 2.1% as the macroeconomic framework is not conducive to confidence, according to the institution.
Growth in Angola is, meanwhile, anticipated to accelerate to 1.5%, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment and bolster private investment.
In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4%. In Kenya, growth is seen edging up to 6%.
Growth in the Middle East and North Africa is projected to accelerate to a modest 2.4% this year, largely on higher investment and stronger business climates. Among oil exporters, growth is expected to pick up to 2%.
Growth in oil importers is expected to rise to 4.4%.
Higher investment and private consumption are expected to support a rise to 5.8% in the 2020 financial year’s growth in Egypt.