Warning On 2020 Global Growth Issued By World Bank

The World Bank has said that if everything goes just right, there can be a modest rebound this year in the global economy after its weakest performance in 2018 since the global financial crisis.

The global financial body has identified two major trends in the global economy that pose a threat about the course of economic growth in the current year – the unprecedented growth in debt globally and the sustained fall in growth in productivity.

The World Bank said that in order to boost standards of living and poverty eradication, the global economy needs to pick up on these trends and issues.

The World Bank’s semi-annual Global Economic Prospects forecasts that in 2020, there will be a small growth in the global economy to reach 2.5% from 2.4% last year. It also forecast that there would be a slowdown from 1.6% to 1.4% for growth of advanced economies as a group which would primarily be due to sustained loss of strength in manufacturing.

There will however be an acceleration of growth in the emerging market and developing economies for 2020, the Bank predicted in the forecast with growth increasing from 3.5% in 2019 to touch 4.1% in 2020. The report however expects that this growth will be fueled primarily by a small number of large emerging economies as they emerge from economic doldrums or get stabilized after a period of recession and turbulence.

On the other hand, a continued drop in exports and investment will result in deceleration if economic growth of many other economies.

The Bank report noted that the rate of increase of debt accumulation among emerging and developing economies has been the largest, fastest, and most broad-based in the last few years compared to what had been the trend in the last 50 years which is the most important feature that clouds the global economic growth forecast. In 2018, the total debt among these economies increased to about 170% of GDP compared to only about 115% of GDP in 2010. The debt accumulation has also troubled some of the low-income countries following a drop in the trend between 2000 and 2010.

The Bank report also noted a critical difference in the current debt accumulation trend compared to earlier periods of high debt. It stated that there are increased concerns about debt transparency and debt collateralization because of an increase in the share of non-resident holdings of EMDE government debt, an increase in debt from foreign currency-denominated private EMDEs, and increase in borrowing from financial markets and non-Paris Club bilateral creditors by low-income countries.

Additionally the forecast of global growth is also clouded by the broad-based slowdown in productivity growth during the last ten years, the report noted. Rising of living standards and achieving development goals is critically dependent on growth in productivity which is the output per worker.

“Among emerging and developing economies, which have a history of productivity growth surges and setbacks, the slowdown from 6.6% in 2007 to a trough of 3.2% in 2015 has been the steepest, longest, and broadest on record. The slowdown is due to weaker investment and efficiency gains, dwindling gains from the reallocation of resources to more productive sectors, and slowing improvements in the key drivers of productivity, such as education and institutional quality,” the World Bank noted in the report. .

(Adapted from WorldBank.org)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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