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World Bank Forecasts Global Growth of 2.7 Percent, Asia to Expand 6.2 Percent

The global economy will expand 2.7% in 2017, an improvement over last year, but growth in East Asia and Pacific will ease to 6.2% as output in China slows to 6.5%. Excluding China, growth in Asia is expected at a faster 5% clip.

“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” said World Bank Group President Jim Yong Kim. “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.”

Latest report

While relatively optimistic, the World Bank's 2017 Global Economic Prospects report highlighted uncertainty about policy direction in major economies as a potential risk. "More expansionary US fiscal policies could lead to stronger growth in the United States over the near-term, but changes to trade or other policies could offset those gains," warned Ayhan Kose, World Bank Development Economics Prospects Director. New US President Donald Trump, who takes office on January 20, made an America First policy the cornerstone of his presidential campaign. 

The World Bank is particularly worried about investment growth in emerging markets and developing economies, which fell to 3.4% in 2015 from an average of 10% in 2010. Investment growth likely declined another half a percentage point in 2016. 

The bank attributed the decline partly to a correction from high pre-crisis levles, but said it also reflects "obstacles to gorwth that emerging and developing economies have faced, including low oild prices (for oil exporters), slowing foreign direct investment (for commodity importers), and more broadly, private debt burdens and political risk."

Recovery prospects

The report forecasts 2.2% GDP growth in the US "as manufacturing and investment growth gain traction after a weak 2016." Growth in the developed markets as a whole is expected to rise 1.8%.

Growth in emerging and developing markets will be 4.2%, faster than the 3.4% notched last year, boosted in part by modestly rising commodity prices. "However, overall prospects fro emerging market and developing economies are dampened by tepid international trade, subdued investment, and weak productivity growth," says the bank.

In Asia Pacific, the World bank expects accelerated GDP growth in Indonesia, Malaysia and Thailand, and broadly stable growth in the rest of the region, except for China. The modest slowdown there is expected to be supported by domestic drivers of growth, although these cannot fully make up for soft external demand, weak private investments, and overcapaciy in some sectors.

India is forecast to growth 7.6% in fiscal year 2017-2018 "as reforms loosen domestic supply bottlenecks and increase productivity."

 

 

 

 

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