World Bank maintains global growth forecasts with warning

Washington: The World Bank has kept its growth forecasts for the global economy unchanged for this year and next year, but warned of a combination of considerable downside risks including escalating trade protectionism.

In its newly-released Global Economic Prospects report, the World Bank on Tuesday said the global economy would grow 3.1 per cent in 2018 before slowing to 3 per cent in 2019, unchanged from its previous forecasts in January.

Growth in advanced economies is expected to moderate slightly to 2.2 per cent in 2018 and further slow down to 2 per cent next year, as central banks gradually remove monetary stimulus, according to the report.

Growth in emerging market and developing economies is projected to strengthen to 4.5 per cent in 2018 before reaching 4.7 per cent in 2019, as "the recovery in commodity exporters matures and commodity prices level off following this year's increase".

The World Bank upgraded its forecast for China's economic growth in 2018 to 6.5 per cent, 0.1 percentage point higher than its January forecast. But the growth is estimated to edge down to 6.3 per cent in 2019, as regulatory and macroprudential policies are expected to tighten and fiscal policy is anticipated to become less accommodative.

The Washington-based international lender also warned that global economic growth is facing "considerable downside risks."

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"The possibility of disorderly financial market volatility has increased, and the vulnerability of some emerging market and developing economies to such disruption has risen," the World Bank said, noting trade protectionist sentiment has also mounted and policy uncertainty and geopolitical risks remain elevated.

"The probability of an abrupt slowdown in global growth has risen and could increase further if one or several downside risks materialize," said the lender.

In terms of trade policy, the World Bank said the outcome of some trade negotiations is still uncertain and "the risk of escalating trade restrictions has intensified," as new tariff announcements by the US have led to retaliatory responses by major trading partners.

The report came after the Trump administration announced last week to impose tariffs on steel and aluminium imports from the European Union (EU), Canada and Mexico, which has drawn strong opposition from the domestic business community and US trading partners.

"A broad-based increase in tariffs worldwide would have major adverse consequences for global trade and activity," the World Bank said, adding the threat of substantial shifts in trade policies in major economies could also have negative consequences for financial markets and investment.