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Thu, 23 Jan 2020 08:01 GMT

World Bank Warns of Slow Growth and Rising Debt


7Dnews London

Thu, 09 Jan 2020 18:36 GMT

The World Bank on Wednesday January 8th predicted slightly slower global growth for 2019 and 2020 and cautioned about the sharp rise in global debt burdens.

Reuters reported that the multilateral development bank marked 2019 as the year of weakest economic expansion since the global financial crisis a decade ago, with 2020 remaining vulnerable to uncertainties over trade and geopolitics.

In its latest Global Economic Prospects report, the World Bank shaved 0.2% off of growth for both years, with the 2019 global economic growth forecast at 2.4% and 2020 at 2.5%.

These forecasts take into account the so-called Phase 1 trade deal announced by the US and China, which suspended new US tariffs on Chinese consumer goods scheduled for December 15th 2019 and reduced the tariff rates on some other goods.

The main effect of the deal is expected to be greater business confidence and more investment prospects, which are predicted to boost trade growth, according to Ayhan Kose, the World Bank's lead economic forecaster.

"We do expect an improvement, but overall, we also see a weaker growth outlook," Kose said.

Advanced economies and developing economies show divergent prospects in the World Bank forecasts. The European area and Japan are expected to decline slightly to 1.4% in 2020 from 1.6% in 2019.

Emerging market economies are expected to see a pickup in growth to 4.3% in 2020 from 4.1% in 2019, although these are both lower than forecasts made last June.

Argentina and Iran are expected to come out of recessions in 2020, and prospects look better for six countries that struggled with slowdowns in 2019, including Brazil, India, Mexico, Russia, Saudi Arabia and Turkey.

The World Bank forecast projects growth in China, the world's second-largest economy, falling to slower rates of 5.9% this year, 5.8% next year and 5.7% in 2022. That would mark the slowest growth period for China since the early 1990s, with the trade war and tighter regulations on the country's shadow banking sector being the main brakes on investment.

China's outlook could worsen if trade tensions with Washington flare up again, or there is a disorderly unwinding of debt. But Kose said China had sufficient policy buffers to cushion any deeper slowdown.

Apart from the rise in protectionist barriers, the World Bank cited other threats to the global economy as weak productivity gains and a sharp rise in world debt burdens.