World Bank Forecasts Global Growth After 2016 Lows

Global economic growth looks likely to pick up this year, albeit moderately in the face of substantial uncertainty.

A World Bank report released Tuesday forecasts economic growth to increase to 2.7% this year as obstacles before emerging market and developing economy exporters (like low oil prices and slowing foreign investment) recede and domestic demand stays strong for importers. For advanced economies, growth is expected to hover around the 1.8% mark.

“Fiscal stimulus in major economies—particularly in the United States—could generate faster domestic and global growth than projected, although rising trade protection could have adverse affects,” according to the World Bank.

Rising commodity prices are expected to bring growth in emerging market and developing economies as a whole to 4.2% this year, up from 3.4% last year.

However, as has been the biggest concern for global economic growth, uncertainty about policy direction in some of the world’s major economies has clouded the outlook. The “protracted” period of uncertainly could see investment growth remain slow, which won’t do well to serve low, middle and high income countries, according to the World Bank.

Investment growth fell to 3.4% last year, down from an average of 10 percent in 2010.

“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” World Bank Group president Jim Yong Kim, said. “Now is the time to take advantage of this momentum and increase investments in infrastructure and people. This is vital to accelerating the sustainable and inclusive economic growth required to end extreme poverty.”

The United States

Growth in the United States should increase to 2.2% this year thanks to a pick-up in manufacturing and investment.

“Because of the outsize role the United States plays in the world economy, changes in policy direction may have global ripple effects. More expansionary U.S. fiscal policies could lead to stronger growth in the United States and abroad over the near-term, but changes to trade or other policies could offset those gains,” said World Bank Development Economics Prospects director Ayhan Kose. “Elevated policy uncertainty in major economies could also have adverse impacts on global growth.”

China

China’s growth will continue to slow, reaching a projected 6.5% this year.

“Macroeconomic policies are expected to support domestic drivers of growth despite soft external demand, weak private investment, and overcapacity in some sectors,” according to the World Bank. “Excluding China, growth in the region is seen advancing at a more rapid 5 percent rate in 2017.”

Europe and Central Asia

A recovery in Turkey could help the Europe and Central Asia region reach a higher 2.4% for the year, though that too depends on political uncertainty easing and a recovery in commodity prices.

South Asia

Growth in the region should rise modestly to 7.1%, owed mostly to growth in India, which is expected to reach 7.6% this year as reforms loosen and productivity picks up. Pakistan’s growth will reach 5.5% and Bangladesh will see growth of 6.8% in 2017.

Sub-Saharan Africa

In the region more sourcing executives are eyeing for production, growth will tick up slightly to 2.9%, as countries adjust to lower commodity prices.


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