The World Bank sharply cut its global growth forecast, citing the effects of low commodity prices in emerging markets, and aging populations and weak business investment in advanced economies such as the US.
The global economy is expected to grow 2.4% this year, the bank said, down from its January forecast of 2.9%. It estimates the world economy expanded by 2.4% last year as well. "This sluggish growth underscores why it's critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty," said World Bank Broup President Jim Yong Kim. Bank officials are calling for increased investment in infrastructure, productivity-enhancing technology and human capital.
Bank officials attribute about half the downward revision to emerging markets and developing economies that depend heavily on exports of oil and other commodities whose prices have plummeted. Economic growth of 3.5% is expected in those countries, down from the previous 4.1% forecast.
Russia and Brazil, both mired in recession, are expected to see their economies contract 1.2% and 4%, respectively, more dramatically than the bank's January projection. China’s estimated growth of 6.7% was unchanged but slightly below last year’s pace as the country grapples with a shift from an economy driven by investment to domestic consumption.
Advanced economies, meanwhile, are projected to grow 1.7%, below the bank's 2.2% forecast in January. It estimates the US economy will grow 1.9% this year, well below these 2.7% forecast in January. The nation's economy grew a meager 0.8% at an annual rate in the first quarter as low oil prices and weakness overseas continued to hammer manufacturing and business investment, while consumer spending slowed.
The euro area economy is expected to expand by 1.6%, just 0.1% below the January estimate. The European Central Bank stepped up a bond buying stimulus earlier this year.