World Bank slashes 2016 global growth forecast to 2.4 per cent

The World Bank is sharply lowering its 2016 forecast for the global economy, citing slow growth in rich countries, low commodity prices and weakness in global trade and investment.

The Washington-based development agency, which projected in January that growth would reach 2.9 per cent, lowered the outlook to 2.4 per cent.

Lower prices for oil and other commodity exports from developing and emerging economies account for more than half of the downgrade, the World Bank said in the update to its Global Economic Prospects report.

Commodity-exporting countries in particular are struggling to adapt, the report said.

"This sluggish growth underscores why it's critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty," World Bank President Jim Yong Kim said in a statement.

"Economic growth remains the most important driver of poverty reduction, and that's why we're very concerned that growth is slowing sharply in commodity-exporting developing countries due to depressed commodity prices."

As a group, those developing and emerging economies that are dependent on commodity exports are now forecast to grow at a pace of 0.4 per cent in 2016, down from 1.6 per cent in the January outlook.

The ongoing recessions in Russia and Brazil were forecast to be deeper this year than first predicted in January.

Among emerging and developing economies that are commodity importers, the benefits of cheaper energy have been "slow to materialize," the World Bank said.

"Growth continues to falter in advanced economies and, while there is considerable divergence of performance across emerging market and developing economies, their overall growth remains below potential," World Bank chief economist Kaushik Basu said in the report.

He offered a "somber message" that the global economy "faces pronounced risks of another stretch of muted growth."

Basu urged governments in emerging and developing countries to "put a premium" on politically difficult economic reforms to spur growth.

"Although global growth is projected to accelerate gradually," he said, "a wide range of risks threaten to derail the recovery, including a sharper-than-expected slowdown in major emerging markets, sudden escalation of financial market volatility, heightened geopolitical tensions, slowing activity in advanced economies and diminished confidence in the effectiveness of policies to spur growth."

Last update: Wed, 08/06/2016 - 10:02

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