World Bank predicts global economic slowdown

The international organization cuts the global growth forecast.

World Bank building Source: Bloomberg

The World Bank has a dire forecast for the international economy. The global organisation has predicted a slowdown in global growth.

Trade troubles and volatile markets bring down global economic forecast

In an ominous report entitled ‘ Darkening Skies’, the World Bank predicts that the global economy will only grow 2.5% ,instead of the 3% expected from financial experts. The anti-poverty organisation noted that the US-China trade war and other global factors will affect economies all over the world. The bank believes that the tariffs imposed by both nations will negatively affect manufacturers around the world.

‘The outlook for the global economy has darkened. Global financing conditions have tightened, industrial production has moderated, trade tensions have intensified, and some large emerging market and developing economies have experienced significant financial market stress. Faced with these headwinds, the recovery in emerging market and developing economies has lost momentum’, wrote the bank.

Investors around the globe have been unnerved by volatility in developing countries and uncertainty in the US as well. Ayhan Kose, director of the World Bank’s development prospects group, noted that the slowdown in the global stock market in 2018 also factored into the World Bank downgrading the possibility of global economic growth.

‘Global growth is slowing, and the risks are rising. The global economy was pretty much firing on all cylinders. In 2018, the engines started sputtering,’ said Kose.

'We are facing a more difficult period for the global economy and the volatility in the financial markets certainly gave us that signal recently,' said World Bank chief executive officer (CEO), Kristalina Georgieva, who will replace retiring president, Jim Yong Kim.

How emerging markets are hurt by US slowdown

Countries with emerging markets that borrowed money with the US dollar are now suffering with repaying their debts with a rising dollar and high interest rates. Georgieva said that developing nations will struggle to fund themselves because of debt.

‘Now debt service is eating into government revenues, making it more difficult (for governments) to fund essential social services', said Georgieva.

Despite the downbeat outlook, the US economy is predicted to remain steady, and the Japanese economy is expected to grow by 0.9 % in 2019.

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