World Bank Revises Global Growth Estimates Amidst Weak Demand
The World Bank has slashed the forecast for global growth again putting it at 2.4 percent, a decline from the 2.9 percent it had predicted in January this year. This estimate is more pessimistic than that of the International Monetary Fund which predicted 3.2 percent in a forecast made this April.
The bank released its latest Global Economic Prospects report which has said that low commodity prices are affecting the growth of developing countries which depend on commodity exports, a key reason for the downward adjustment. It has predicted a growth of 0.4 percent for these economies.
Those importing these commodities are doing better but the World Bank has said that these countries are seeing the benefits from the low prices at a very slow rate. These developing countries are expected to now grow at approximately 5.8 percent.
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Latin America has been badly hurt by these fluctuating commodity prices. According to World Bank’s estimates the region’s economy will decline by 1.3 percent this year, after dropping 0.7 percent last year. Brazil which has been hit by political turmoil is expected to register a fall of 4 percent in its economy. The country’s economy had contracted by 3.8 percent last year.
The World Bank has left the growth estimates for China unchanged at 6.7 percent. The Chinese government has been struggling to stem the slowdown in its economy as it drives a shift from an export-oriented economy towards a domestic demand-driven economy with a higher focus on services. India’s growth rate was similarly left unchanged at 7.6 percent.
Among the developed nations, the estimate for United States has been set at 1.9 percent while the Euro region is expected to grow at 1.6 percent. In a statement, Kaushik Basu, World Bank chief economist said,
As advanced economies struggle to gain traction, most economies in south and east Asia are growing solidly, as are commodity-importing emerging economies around the world.
He however issued a warning that the rising amount of private debt in many emerging countries could be a risk factor to growth if a significant proportion of them turn non-performing.
The revision for the U.S. reflects the weak results during the first quarter where the economy recorded an annual growth rate of 0.8 percent. Japan is expected to grow by a meager 0.5 percent, a slightly lower rate than last year. The recent efforts by Prime Minister Shinzo to kickstart the economy has so far yielded limited results.
