The World Bank, in its Global Economic Prospects report, says growth in 2014 was disappointing, risks are tilted to the downside, and policymakers face tough challenges.
Here are some of the report highlights.
- The recovery has been weaker than expected by the World Bank in its previous report in June 2014.
- A "string of disappointing growth outturns" in the euro currency zone, Japan, parts of emerging Europe (notably Russia) and Latin America.
- Global growth picked up only marginally to 2.6 per cent in 2014 from 2.5 per cent in 2013.
- Recovery gained strength in the US and the UK.
- The euro area and Japan are lagging behind.
- China's growth is robust but gradually decelerating.
- Growth in middle and low income countries slipped.
- Structural factors, including a trend slowdown in productivity, reduce potential growth.
Major forces are driving the global outlook, including
- Soft commodity prices, expected to persist.
- Low interest rates to continue but with divergent monetary policies across major economies.
- Weak world trade.
- Sharply lower oil prices will support the global economy, especially oil-importing developing economies, but will hinder growth in oil-exporting countries, with "significant regional repercussions".
- Growth was robust in low-income countries at about six per cent in 2014 and is expected to stay near that pace in 2015 to 2017.
- Global growth is expected to rise moderately, to three per cent in 2015, 3.3 per cent in 2016 and 3.2 per cent in 2017.
- "Risks to this slow-moving global recovery are significant and tilted to the downside."
- Financial market volatility could sharply raise the borrowing costs faced by developing countries.
- Intensifying geopolitical tensions, bouts of volatility in commodity markets, or financial stress in a major emerging market could lead to a reassessment of risk assets (like shares and property).
- Global trade could weaken more if the euro area or Japan slip into prolonged stagnation or deflation.
- A sharper decline in growth could cause a "disorderly unwinding of financial vulnerabilities" in China - a low probability event but one with "considerable implications for the world economy".
- Low interest rates and flexible fiscal policy will be needed to support growth in high-income countries.
- High-income countries also need structural reforms and concrete medium-term plans to consolidate budgets.
- The World Bank Group's goal to cut extreme poverty to below three per cent by 2030 will be challenging under current growth projections.
For the full report, click here http://www.worldbank.org/en/publication/global-economic-prospects.
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