In its latest forecasts, the World Bank expects the global economy to expand modestly by 2.7% this year, led by a recovery emerging market and developing nations in Asia and elsewhere.
“Global manufacturing and trade have firmed, financing conditions remain benign, and commodity prices have generally stabilized,” reports the World Bank in Global Economic Prospects: Fragile Recovery, released this month.
But the bank warns of downside risks, despite the possibility of more expansionary fiscal policy in major advanced economies. These include:
- Escalating trade restrictions that could derail a fragile recovery in trade and undo gains from past liberalization efforts
- A further increase in policy uncertainty from already high levels, which could dampen confidence and investment.
- Market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization that could provoke financial turbulence and contribute to swings in asset prices and capital flows in emerging market and developing economies
- A renewed slide in oil prices that could set back the incipient recovery in oil exporters
- Persistent weakness in productivity and investment growth could further erode potential growth over the longer term
Star economies in Asia
The bank’s economists expect growth in emerging market and developing economies to increase to 4.1% this year and average 4.6% in 2018-19 – from a post-crisis low of 3.5% in 2016.
“The improvement is driven by diminishing obstacles to activity in commodity exporters and robust growth in commodity importers,” says the bank.
The prospects for advanced economies are more modest. Growth in the US, Euro Area, Japan and the UK aggregates at 1.9% in 2017, only slightly better than the 1.7% recorded last year.
In 2017, South Asia and East Asia and Pacific are forecast to grow the fastest among the world’s regions, led by India at 7.2%, Philippines at 6.9%, China at 6.5% and Vietnam at 6.3%.
World Bank Forecasts, Selected Asian Economies