Global economic growth is forecast to edge up to 2.5 per cent in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist, the World Bank says in its January 2020 Global Economic Prospects.
Growth among advanced economies as a group is anticipated to slip to 1.4 per cent in 2020 in part due to continued softness in manufacturing. Growth in emerging market and developing economies is expected to accelerate this year to 4.1 per cent.
This rebound is not broad-based; instead, it assumes improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness. About a third of emerging market and developing economies are projected to decelerate this year due to weaker-than-expected exports and investment.
“With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth.”
“Low global interest rates provide only a precarious protection against financial crises,” said World Bank Prospects Group Director Ayhan Kose. “The history of past waves of debt accumulation shows that these waves tend to have unhappy endings. In a fragile global environment, policy improvements are critical to minimize the risks associated with the current debt wave.”
Europe and Central Asia: Regional growth is expected to firm to 2.6 per cent in 2020, assuming stabilization of key commodity prices and Euro Area growth and recovery in Turkey and Russia. Economies in Central Europe are anticipated to slow to 3.4 per cent as fiscal support wanes and as demographic pressures persist, while countries in Central Asia are projected to grow at a robust pace on the back of structural reform progress. Growth is projected to firm in the Western Balkans to 3.6 per cent although the aftermath of devastating earthquakes could weigh on the outlook and decelerate in the South Caucasus to 3.1 per cent.
Latin America and the Caribbean: Regional growth is expected to rise to 1.8 per cent in 2020, as growth in the largest economies strengthens and domestic demand picks up at the regional level. In Brazil, more robust investor confidence, together with a gradual easing of lending and labor market conditions, is expected to support an acceleration in growth to two per cent Growth in Mexico is seen rising to 1.2 per cent as less policy uncertainty contributes to a pickup in investment, while Argentina is anticipated to contract by a slower 1.3 per cent.
In Colombia, progress on infrastructure projects is forecast to help support a rise in growth to 3.6 per cent. Growth in Central America is projected to firm to three per cent thanks to easing credit conditions in Costa Rica and relief from setbacks to construction projects in Panama. Growth in the Caribbean is expected to accelerate to 5.6 per cent, predominantly due to offshore oil production developments in Guyana. Regional data.
Middle East and North Africa: Regional growth is projected to accelerate to a modest 2.4 per cent in 2020, largely on higher investment and stronger business climates. Among oil exporters, growth is expected to pick up to 2 per cent. Infrastructure investment and business climate reforms are seen advancing growth among the Gulf Cooperation Council economies to 2.2 per cent.
Iran’s economy is expected to stabilize after a contractionary year as the impact of US sanctions tapers and oil production and exports stabilize, while Algeria’s growth is anticipated to rise to 1.9 per cent as policy uncertainty abates and investment picks up. Growth in oil importers is expected to rise to 4.4 per cent. Higher investment and private consumption are expected to support a rise to 5.8 per cent in FY2020 growth in Egypt.
Sub-Saharan Africa: Regional growth is expected to pick up to 2.9 per cent in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters.
The forecast is weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries. In South Africa, growth is expected to pick up to 0.9 per cent, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers.
Growth in Nigeria expected to edge up to 2.1 per cent as the macroeconomic framework is not conducive to confidence. Growth in Angola is anticipated to accelerate to 1.5 per cent, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment. In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4 per cent. In Kenya, growth is seen edging up to six per cent.