Global economy to grow by 2.5% in 2020 even as downward risks continue to persist, says World Bank

GLOBAL – Global economic growth is projected to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist, the World Bank says in its January 2020 Global Economic Prospects.

According to the World Bank, growth among advanced economies as a group is anticipated to slip to 1.4% in 2020 in part due to continued softness in manufacturing.

Growth in emerging market and developing economies is expected to accelerate this year to 4.1%.

The Bank however notes that this rebound is not broad-based; instead, it assumes improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness.

About a third of emerging market and developing economies are projected to decelerate this year due to weaker-than-expected exports and investment.

“With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu.

“Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth,” added Pazarbasioglu.

U.S. growth is projected to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty.

Euro Area growth is projected to slip to a downwardly revised 1% in 2020 amid weak industrial activity.

Downside risks to the global outlook predominate, and their materialization could slow growth substantially, the World Bank observed.

These risks include a re-escalation of trade tensions and trade policy uncertainty, a sharper-than expected downturn in major economies, and financial turmoil in emerging market and developing economies.

Even if the recovery in emerging and developing economy growth takes place as expected, per capita growth would remain well below long-term averages and well below levels necessary to achieve poverty alleviation goals.

“Low global interest rates provide only a precarious protection against financial crises,” said World Bank Prospects Group Director Ayhan Kose.

“The history of past waves of debt accumulation shows that these waves tend to have unhappy endings.

In a fragile global environment, policy improvements are critical to minimize the risks associated with the current debt wave.”

The World Bank projected growth in the Sub-Saharan Africa region to pick up to a high of 2.9% in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters.

The forecast is, however, weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries.

In South Africa, growth is expected to pick up to 0.9%, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers.

Word Bank said that growth in Nigeria expected to edge up to 2.1% as the macroeconomic framework is not conducive to confidence.

For Angola, growth is anticipated to accelerate to 1.5%, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment.

In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4% while the Kenya economy is projected to grow steadily edging up to 6%.

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