Six months after predicting 3% global economic growth for 2019, the World Bank has downgraded its forecast. The Washington, DC-based international partnership said this month it expects the world’s economy to grow by 2.9% this year, down from the 3% growth the economy achieved in 2018 and 3.1% in 2017.
“At the beginning of 2018, the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,” said World Bank CEO Kristalina Georgieva.
The World Bank cited softening in international trade and investment as a key factor in the downgraded forecast. “Trade tensions remain elevated,” according to the January 2019 Global Economic Prospects report. “Several large emerging markets underwent substantial financial pressures last year.”
Against this “challenging” backdrop, the organization expects flat growth in emerging market and developing economies. Meanwhile, according to the report, “The pickup in economies that rely heavily on commodity exports is likely to be much slower than hoped for. Growth in many other economies is anticipated to decelerate.”
The Trump administration’s imposition of tariffs, and the retaliatory trade barriers thrown up by other countries, are driving the bank’s prediction of decelerating growth for world trade. It’s expected to increase by 3.6% in 2019, down from 3.8% in 2018 and 5.4% in 2017.
There’s also the weight of higher levels of debt. These have left some economies, especially poorer countries, “more vulnerable to rising global interest rates, shifts in investor sentiment or exchange rate fluctuations,” according to the report.
The bank’s forecast of 2.5% growth for the U.S. economy in 2019, down from 2.9% in 2018, is unchanged from six months ago. Growth in the euro zone is projected at 1.6% for the year, down from 1.9% last year. China, the world’s second-largest economy, is expected to grow by 6.2% in 2019, compared to 6.5% in 2018.
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