The World Bank is warning of increasing risks, or what it calls “darkening skies”, for the world economy.
In its annual assessment of global prospects the Bank predicts continued, though somewhat slower, growth this year and next.
The Bank’s forecast for the global economy is expansion this year of 2.9% and 2.8% in 2020.
But overhanging the broadly favourable outlook are rising concerns that could mean economic performance falls short.
There is certainly some good news in this report. While the global economy is slowing down it’s likely to be what the Bank’s economists call a “soft landing”. The slowdown started in the middle of last year and it has so far been “orderly”.
The predicted slowdown is focused on the rich countries, particularly the US, although it will continue to expand more rapidly than either the Eurozone or Japan according to the Bank’s forecasts.
The US slowdown is the result of the fading impact of President Trump’s tax cuts and by 2021 its growth will have almost halved – to 1.6% compared with 2.9% last year.
On the other hand, growth in emerging markets and developing economies is likely to gather pace somewhat despite the continued cooling down in China – a process which began at the start of the decade.
By 2021 growth in China is expected to be 6%, which is still pretty strong, but it is a marked change of gear for an economy that expanded by an average of 10% annually between 1980 and 2010.
Franziska Ohnsorge, a World Bank economist and lead author of the report said in a BBC interview: “In China it’s policy engineered, a very deliberate slowdown towards more stable long term growth.”
That is what the Bank thinks is the likely performance of the world economy over the next few years. But there are risks that could mean that it doesn’t work out so well.
