World Bank lowers global growth projection on subdued demand, goods prices

The World Bank has lowered global growth projection on sharp slowdown in world demand amid mounting pressure on commodity prices, the World Bank warned Tuesday. The world economy is facing headwinds as underdeveloped economies are tumbling and developed economies struggling.

The bank’s latest projection pegs global growth at 2.4 percent, down from the 2.9 percent forecast made in January and slower than last year’s weak pace. The bank also cut its forecast for growth in 2017 to 2.8 percent from 3.1 percent, report published by the World Bank showed.

"The global outlook faces pronounced risks of another stretch of muted growth. A wide range of risks threaten to derail the recovery," said Kaushik Basu, Chief Economist, World Bank.

Major commodity exporters such as Brazil, Russia, Nigeria and Angola suffered some worst ever downward revisions, with the respective governments forced to cut spending owing to a collapse in metals, energy and other commodity prices, the report showed. Growth in these economies is projected to advance at a meager 0.4 percent pace this year, a downward revision of 1.2 percentage points from the January outlook.

However, the bank pared its projections for the world’s largest economy, the United States. A wounded energy sector, strong dollar and anemic international demand contributed to a 0.8-percentage-point cut in growth expectations to 1.9 percent for the year.

China is believed to grow at 6.7 percent after last year’s 6.9 percent. India’s robust economic expansion is expected to hold steady at 7.6 percent, while Brazil and Russia are projected to remain in deeper recessions than forecast in January, the bank added to its basket of forecasts.

"This sluggish growth underscores why it’s critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty," said Jim Yong Kim, President, World Bank Group.

Growth in the East Asia and Pacific region is projected to slow to an unrevised 6.3 percent rate in 2016, while that in Russia is projected to grow at 1.2 percent this year, a 0.4 percentage point downward revision from the January outlook.

Geopolitical tension, including terror attacks in Turkey coupled with the violence in eastern Ukraine and Caucasus, led to a depressed outlook. Further, lower prices of oil, metals and agricultural commodities also led to downward revision of the economic outlook. However, the western region will presumably benefit from moderate growth in the Euro area, led by Germany and Italy amid subdued fuel costs.

"Flagging growth prospects in emerging markets and developing economies would slow or even reverse their progress in catching up to income levels of advanced economies," said Ayhan Kose, Director, Development Economic Prospects Group.