Continuing its persistent theme of the past few years, the World Bank took an axe to its global growth forecasts overnight.
The Bank predicts global economic growth of 2.8% for calendar year 2015, down 0.2% on its previous forecast released in January this year. High income nations (developed) are forecast to grow by 2.0%, down 0.2% on its previous estimate, while growth expectations for developing nations were slashed by 0.4% to 4.4%.
Here’s what they had to say:
“Global growth is expected to be 2.8 percent in 2015, lower than anticipated in January. Growth is expected to pick up to 3.2 percent in 2016–17, broadly in line with previous forecasts. Developing economies are facing two transitions.
First, the widely expected tightening of monetary conditions in the United States, along with monetary expansion by other major central banks, has contributed to broad-based appreciation in the U.S. dollar and is exerting downward pressure on capital flows to developing countries. Many developing-country currencies have weakened against the U.S. dollar, particularly those of countries with weak growth prospects or elevated vulnerabilities. In some countries, this trend has raised concerns about balance sheet exposures in the presence of sizeable dollar-denominated liabilities. Currency depreciations have been significantly less in trade-weighted terms, partly due to a weakening euro and yen, thus offering only modest prospects for competitiveness gains to boost exports.
Second, despite some pickup in the first quarter of 2015, lower oil prices are having an increasingly pronounced impact. In oil-importing countries, the benefits to activity have so far been limited, although they are helping to reduce vulnerabilities. In oil-exporting countries, lower prices are sharply reducing activity and increasing fiscal, exchange rate, or inflationary pressures. Risks remain tilted to the downside, with some pre-existing risks receding but new ones emerging”.
The full breakdown of the banks’ updated forecasts can be found below.
As you can see growth forecasts for the US and Japan, the world’s largest and third-largest economies respectively, have had their 2015 growth forecasts cut by 0.5% and 0.1%. China, sandwiched in between, is expected to grow by 7.0%, unchanged from January and in line with Chinese policymakers set objective. The Euro area, reflective of the improved economic performance seen recently, had its growth forecast upgraded by 0.4% to 1.5%.
You can check out the full report from the World Bankhere.