World Bank sees global growth improving to 2.7% in 2017

World Bank sees global growth improving to 2.7% in 2017

Tokyo - GLOBAL economic growth should accelerate modestly to 2.7 per cent this year after a post-crisis low of 2.3 per cent in 2016, but the outlook is clouded by uncertainty about policy direction in major economies, the World Bank cautioned in a report on Tuesday.

Growth in advanced economies is expected to edge up to 1.8 per cent in 2017 from 1.6 per cent last year. The World Bank's January 2017 Global Economic Prospects report put US growth at 2.2 per cent in 2017, up sharply from 1.6 per cent last year but is projected to decline to 2.1 per cent next year and 1.9 per cent in 2019.

Euro area growth will be 1.5 per cent in 2017 and remain roughly constant in 2018 and 2019 while Japan's growth is projected to slip slightly to 0.9 per cent in 2017, sliding to 0.8 per cent next year and slumping to 0.4 per cent in 2019 on the back of a consumption tax rise.

However, "the range of possible outcomes has widened markedly after the electoral outcome in the United States and the United Kingdom's decision to leave the Europan Union", the World Bank said.

Current forecasts, it noted, "do not incorporate the potential effects of policy proposals suggested by the new US administration, as their scope is still highly uncertain".

Fiscal stimulus in major economies - particularly in the US - could generate faster domestic and global growth than projected, the report suggested, although rising trade protection could have adverse effects.

"A protracted period of uncertainty could prolong the slow growth in investment that is holding back low, middle, and high-income countries."

What growth is achieved in 2017 will come chiefly from emerging market and developing economies, the report suggested.

"Growth in economies as a whole should pick up to 4.2 per cent this year from 3.4 per cent in the year just ended, amid modestly rising commodity prices."

After "years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon," World Bank group president Jim Yong Kim said upon the launch of the report.

"Now is the time," he suggested, "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."

The report noted what it called a "worrisome" weakening of investment growth in emerging market and developing economies, which account for one-third of global GDP and about three-quarters of the world's population and the world's poor.

Investment growth fell to just 3.4 per cent in 2015 from 10 per cent on average in 2010, and is believed to have declined by a further half percentage point last year, said the report.

"Slowing investment growth is partly a correction from high pre-crisis levels, but also reflects obstacles to growth that emerging and developing economies have faced."

These include "low oil prices (for oil exporters), slowing foreign direct investment (for commodity importers), and more broadly, private debt burdens and political risk."

Emerging market and developing regions with substantial numbers of commodity-importing economies in East Asia, South Asia and the Pacific are "projected to experience solid growth", the report said.

China's growth is put at 6.5 per cent in 2017, down from 6.7 per cent last year, and is projected to ease further to 6.3 per cent in both of the following years.

But India is forecast to recover with 7.6 per cent growth this year after falling to 7 per cent in 2016, and it should rise to 7.8 per cent in both 2018 and 2019, the report suggested.

Meanwhile, Indonesia's economic growth should reach 5.3 per cent this year from 5.1 per cent in 2016, rising to 5.5 per cent in each of the following two years.


This article was first published on Jan 11, 2017.
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