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Wednesday, January 29th, 2020

World Bank Trims Global Growth Forecast Amid U.S. China Trade War

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by January 9, 2020 Market

WASHINGTON The World Bank is forecasting modest economic growth in 2020 as it trimmed back its outlook in the face of a possibly heightened trade war between the United States and China.

In its Global Economic Prospects report published on January 8, the 189 country lending institution projected that the global economy will grow 2.5 percent this year, just slightly better than the 2.4 percent estimated for 2019 but slower than the 2020 forecast previously released.

In June, it forecast growth of 2.6 percent for 2019 and 2.7 for 2020.

The Washington based World Bank said 2019 represented the weakest growth since the global financial crisis a decade ago.

Even with the slight improvement seen for this year, it said 2020 remained vulnerable to uncertainties over trade and geopolitical tensions.

“This modest increase in global growth marks the end of the slowdown that started in 2018 and took a heavy toll on global activity, trade, and investment, especially last year,” said Ayhan Kose, the World Bank’s lead economic forecaster.

“We do expect an improvement, but overall, we also see a weaker growth outlook,” he said.

Manufacturing Slowdown

The lender estimated that growth among advanced economies as a group will decline to 1.4 percent in 2020, partly because of a slowdown in manufacturing.

Growth in emerging market and developing economies is forecast to rise to 4.1 percent this year, although the gains are not broad based and will be dominated by a small group of large economies, it said.

“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 Ceyla Pazarbasioglu, World Bank vice president.

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

It said that in Russia softer than expected investment and trade, along with a continuation of international economic sanctions, resulted in a growth slowdown to an estimated 1.2 percent in 2019. Growth is forecast at 1.6 percent in 2020.

In the South Caucasus Armenia, Azerbaijan, and Georgia growth was estimated at 3.7 percent in 2019 but is seen falling to 3.1 percent this year. Armenia’s growth is forecast at 5.1 percent, Azerbaijan’s at 2.3 percent, and Georgia’s at 4.3 percent for 2020.

Growth is forecast at 3.6 percent in the Western Balkans, up from 3.2 percent last year.

Central Asia’s growth was seen at 4.5 percent last year and is forecast to be 4.4 percent this year.

Growth in the United States, the euro area, and Japan is forecast to slip to 1.4 percent in 2020 from 1.6 percent in 2019 due to continued softness in manufacturing and the negative effects of U.S. tariffs and retaliatory measures.

China’s growth is projected to ease to 5.9 percent in 2020, from 6.1 percent in 2019, as the world’s second largest economy deals with fallout from U.S. tariffs.

Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.

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