The global economy will growth 2.4% this year, the World Bank predicts, amid troubles in both emerging markets and developed nations.
The World Bank marked some of the biggest downward revisions on economies of commodity-exporting countries. The global economy is increasingly vulnerable to a sharp slowdown as troubles in emerging markets mount and as advanced economies struggle to grow, the World Bank warned Tuesday.
The bank’s latest projection pegs global growth at 2.4%, down from the 2.9% forecast in January and slower than last year’s weak pace. The bank also cut its forecast for growth in 2017 to 2.8% from 3.1%.
“The global outlook faces pronounced risks of another stretch of muted growth,” said World Bank chief economist Kaushik Basu. “A wide range of risks threaten to derail the recovery.”
Commodity exporters such as Brazil, Russia, Nigeria and Angola suffered some of the largest downward revisions. Governments have been forced to cut spending due to the price collapse in metals, energy and other commodities. Weakening currencies also are forcing central banks to raise interest rates to curb rampant inflation. And higher borrowing costs are weighing on investment and putting many company balance sheets deep into the red.
The bank pared its projections for the world’s largest economy, the U.S. A wounded energy sector, strong dollar and anemic international demand contributed to a 0.8-percentage-point cut in growth expectations—to 1.9%—for the year.
Japan, the world’s third-largest economy, isn’t gaining traction despite the Bank of Japan’s charge into negative-rate territory. The World Bank said Japan will grow by 0.5% this year, nearly a full percentage point lower than expected in January.
The bank fears emerging-market growth could decelerate further. The bank kept its forecast for a 6.7% expansion in China, the world’s No. 2 economy, as Beijing juices output with more stimulus. But the World Bank warned of building financial risks that could trigger a deep slide in growth.
Bank economists are also concerned the Federal Reserve could tighten faster than markets expect, causing a jump in borrowing costs that could spark financial turmoil around the world. Volatility in capital flows also could flare up again if jittery investors pull out of emerging-market equity, currency and bond markets, they said.
The economists cited political risks as a threat to future growth. A U.K. exit from the European Union could severely damp investment as uncertainty weighs on markets, they said.
