Weak growth among major emerging markets will weigh on global expansion in 2016, according to the latest report from the World Bank, with advanced economies solely responsible for a modest increase in global activity.
According to the World Bank's "January 2016 Global Economic Prospects" report published Wednesday, economic growth in 2016 would pick up to a 2.9 per cent pace, from 2.4 per cent in 2015, despite weakness in emerging market economies.
While global economic growth was less than expected in 2015 amid a decline in commodity prices, flagging trade and episodes of financial volatility, the World Bank noted, the outlook for the coming year hinged on how developed economies performed.
"Firmer growth ahead will depend on continued momentum in high-income countries, the stabilization of commodity prices, and China's gradual transition towards a more consumption and services-based growth model."
The World Bank predicted that developing economies are set to expand by 4.8 per cent in 2016, less than earlier forecasts, but up from a post-crisis low of 4.3 per cent in the year just ended.
However, growth is projected to slow further in China, while Russia and Brazil are expected to remain in recession in 2016. The South Asia region, led by India, is projected to be a "bright spot" with the recently negotiated Trans-Pacific Partnership having the potential , it said, to "provide a welcome boost to trade."
Although the World Bank saw a faster-than-expected slowdown in large emerging economies as "unlikely," such a scenario could have global repercussions, it warned. "Risks to the outlook also include financial stress around the US Federal Reserve tightening cycle and heightened geopolitical tensions." Poverty reduction
For the poor, the prospects of economic improvement appeared distant, however. The World Bank - whose aim is "to end extreme poverty within a generation and boost shared prosperity" - warned that simultaneous weakness in most major emerging markets "is a concern for achieving the goals of poverty reduction and shared prosperity because those countries have been powerful contributors to global growth for the past decade."
World Bank Group President Jim Yong Kim commented in the report that more than 40 per cent of the world's poor live in the developing countries where growth slowed in 2015 and signaled that governments in those nations needed to do more.
"Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable. The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies."