World Bank Predicts Modest Economic Growth in 2020
Global economic growth is forecast to increase to 2.5 percent in 2020, the World Bank says in its January 2020 Global Economic Prospects.
Growth among advanced economies as a group is anticipated to slip to 1.4 percent in 2020 in part due to continued softness in manufacturing. Growth in emerging market and developing economies is expected to accelerate this year to 4.1 percent. This rebound is not broad-based; about a third of emerging market and developing economies are projected to decelerate this year due to weaker-than-expected exports and investment.
U.S. growth is forecast to slow to 1.8 percent this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty. Euro Area growth is projected to slip to a downwardly revised one percent in 2020 amid weak industrial activity.
Downside risks include a re-escalation of trade tensions and trade policy uncertainty, a sharper-than expected downturn in major economies and financial turmoil in emerging market and developing economies.
The report states that there have been four waves of debt accumulation in the last 50 years. The latest wave, which started in 2010, has seen the largest, fastest, and most broad-based increase in debt among the four. Productivity growth, a primary source of income growth and driver of poverty reduction, has slowed more broadly and steeply since the global financial crisis than at any time in four decades.
East Asia and Pacific
Growth in the region is projected to ease to 5.7 percent in 2020, reflecting a further moderate slowdown in China to 5.9 percent this year amid continued domestic and external headwinds, including the lingering impact of trade tensions. Regional growth excluding China is projected to slightly recover to 4.9 percent, as domestic demand benefits from generally supportive financial conditions amid low inflation and robust capital flows in some countries (Cambodia, the Philippines, Thailand, and Vietnam), and as large public infrastructure projects come onstream (the Philippines and Thailand).
Europe and Central Asia
Regional growth is expected to firm to 2.6 percent in 2020, assuming stabilization of key commodity prices and Euro Area growth and recovery in Turkey (to three percent) and Russia (to 1.6 percent). Economies in Central Europe are anticipated to slow to 3.4 percent as fiscal support wanes and as demographic pressures persist, while countries in Central Asia are projected to grow at a robust pace on the back of structural reform progress.
Latin America and the Caribbean
Regional growth is expected to rise to 1.8 percent in 2020, as growth in the largest economies strengthens and domestic demand picks up at the regional level. In Brazil, more robust investor confidence, together with a gradual easing of lending and labor market conditions, is expected to support an acceleration in growth to two percent. Growth in Mexico is seen rising to 1.2 percent as less policy uncertainty contributes to a pickup in investment, while Argentina is anticipated to contract by a slower 1.3 percent. In Colombia, progress on infrastructure projects is forecast to help support a rise in growth to 3.6 percent. Growth in Central America is projected to firm to three percent due to easing credit conditions in Costa Rica and relief from setbacks to construction projects in Panama. Growth in the Caribbean is expected to accelerate to 5.6 percent, predominantly due to offshore oil production developments in Guyana.
Middle East and North Africa
Regional growth is projected to accelerate to a modest 2.4 percent in 2020, largely on higher investment and stronger business climates. Among oil exporters, growth is expected to pick up to two percent. Infrastructure investment and business climate reforms are seen advancing growth among the Gulf Cooperation Council economies to 2.2 percent. Algeria’s growth is anticipated to rise to 1.9 percent as policy uncertainty abates and investment picks up. Growth in oil importers is expected to rise to 4.4 percent.
Growth in the region is expected to rise to 5.5 percent in 2020, assuming a modest rebound in domestic demand and as economic activity benefits from policy accommodation in India and Sri Lanka and improved business confidence and support from infrastructure investments in Afghanistan, Bangladesh, and Pakistan. In India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow to five percent in FY 2019/20, which ends March 31 and recover to 5.8 percent the following fiscal year. In Pakistan, growth is expected to rise to three percent in the next fiscal year after bottoming out at 2.4 percent in FY2019/20, which ends June 30. In Bangladesh, growth is expected to ease to 7.2 percent in FY2019/2020, which ends June 30, and edge up to 7.3 percent the following fiscal year. Growth in Sri Lanka is forecast to rise to 3.3 percent.
Regional growth is expected to pick up to 2.9 percent in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters. In South Africa, growth is expected to pick up to 0.9 percent, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes and investment gradually recovers. Growth in Nigeria expected to edge up to 2.1 percent. Growth in Angola is anticipated to accelerate to 1.5 percent, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment. In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4 percent. In Kenya, growth is seen edging up to six percent.