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January 16, 2019

Global economy to slow in 2019 as trade weakens

Global economic growth is expected to soften from a downwardly revised 3% last year to 2.9% in 2019 amid rising risks, including the weakening of international trade and manufacturing activity.

By Beth Wright

Global economic growth is expected to soften from a downwardly revised 3% last year to 2.9% in 2019 amid rising risks, including the weakening of international trade and manufacturing activity.

The latest projection from the World Bank notes that international trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.

The latest edition of its 2019 Global Economic Prospects report forecasts growth among advanced economies is set to drop to 2% this year, while slowing external demand, rising borrowing costs, and persistent policy uncertainties expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2% this year.

“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead”, says World Bank CEO Kristalina Georgieva. “As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardised. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”

Meanwhile, the upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35% of emerging market and developing economies in 2019, with the share increasing to 60% in countries affected by fragility, conflict, and violence.

And a number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies, according to the World Bank. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.

“Robust economic growth is essential to reducing poverty and boosting shared prosperity,” adds World Bank Group vice president for equitable growth, finance and institutions, Ceyla Pazarbasioglu. “As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth.”

Click here to view the full report.

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