The World Bank has lowered its forecast for the global growth in 2016 to 2.4 per cent, saying that the world economy is facing stronger headwinds.
In its Global Economic Prospects Report released on Tuesday, the Washington-based institution expected the world economy to grow 2.4 per cent in 2016, 0.5 percentage point lower than the bank’s forecast in January, Xinhua news agency reported.
“Although the global financial crisis is now seven years behind us, the world economy is still struggling to regain momentum,” said Kaushik Basu, chief economist at the World Bank.
Growth continues to falter in advanced economies, while there is considerable divergence of performance across emerging market and developing economies, and their overall growth remains below potential, said Basu.
According to the report, developing economies are forecast to expand by 3.5 per cent in 2016, 0.6 percentage point lower than its January’s projection; advanced economies are expected to grow 1.7 per cent this year, 0.5 lower than its January’s forecast.
Among major emerging market economies, China is forecast to grow at 6.7 per cent this year, India is expected to grow at a robust pace of 7.6 per cent, while Brazil and Russia will see their economies fall by 4 per cent and 1.2 per cent respectively, further down from the World Bank’s January’s forecasts.
In a weak growth environment, the global economy is facing increasingly pronounced downside risks, including a further slowdown in major emerging markets, sharp changes in financial market sentiment, stagnation in advanced economies, a longer-than-expected period of low commodity prices, and heightened policy and geopolitical uncertainties, said the report.
Against the backdrop of weak growth and limited policy space, policymakers in emerging and developing economies should put a premium on enacting reforms, such as investment in infrastructure, education, health and other human skills, promoting economic diversification and liberalizing trade.
As for advanced economies, the World Bank suggested they maintain monetary policy accommodation until economic slack has been absorbed and inflation moves back in line with policy objectives.
Advanced economies could take policies to support infrastructure investment, and implement growth-enhancing tax and labour market reforms, in order to raise income and restore fiscal and monetary policy space, said the report.