Published: Sat, January 11, 2020
Markets | By Otis Pena

Global economy should grow, but could see crisis in 2020

Global economy should grow, but could see crisis in 2020

India's growth rate is forecast to be only 5 percent for the current fiscal year, weighed down by growth of only 4.5 percent in the July-September quarter, according to the 2020 Global Economic Prospects report released on Wednesday.

This outlook, the World Bank said, is "predicated on no renewed escalation of trade tensions between China and the United States and a gradual stabilization in global trade".

The multilateral development bank said 2019 marked the weakest economic expansion since the global financial crisis more than 10 years ago, and 2020, while a slight improvement, remained vulnerable to uncertainties over trade and geopolitical tensions.

The new forecast projects China, the world's second largest economy, will grow at steadily slower rates of 5.9% this year, 5.8% next year and 5.7% in 2022.

"Growth in India is projected to decelerate to 5% in FY 2019-20 amid enduring financial sector issues", said the report. Sustained weakness in exports growth in the region has continued amid slowing manufacturing activity and investment.

In its Global Economic Prospects report published on Thursday, the multilateral lender said the Philippines will grow by 6.1 percent this year and 6.2 percent in 2021 and 2022.

Why it matters: Per Axios' Dion Rabouin, this report shows the economic situation is worse than the World Bank had estimated in October, when it cut its projections for a third time.

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Nigeria's economic growth of real Gross Domestic Product is projected to get to 2.1% from a poor percentage increase of -0.1 per cent due to dreary economic activities of the past year and the underperformance recorded in the agricultural sector as a result of "lingering insurgency in the Northeast and farmers-herdsmen clashes".

Downside risks to the outlook include a sharper-than-expected deceleration in major trading partners, increased investor risk aversion and growing insecurity.

Similarly, it slashed growth forecasts for advanced and emerging economies including the Euro area, China, India, Pakistan, and a number of other countries. A rebound is forecast for a group of larger economies including Argentina, Brazil and India which are expected to recover this year after a period of substantial weakness.

In Middle East and North Africa, regional growth is projected to accelerate to a modest 2.4 per cent in 2020, largely on higher investment and stronger business climates.

Growth is forecast at 3.6 percent in the Western Balkans, up from 3.2 percent past year.

"With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction", World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu, was quoted as saying. This remains well below the 5 percent average annual trade growth rate since 2010, according to World Bank data.

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