World: Global Growth Set to Strengthen to 2.7 percent as Outlook Brightens

The World Bank forecasts that world economic increase will strengthen to 2.7 % in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow increase to resume in commodity-exporting emerging market and developing economies.

According to the World Bank’s June 2017 World Economic Prospects, increase in advanced economies is expected to accelerate to 1.9 % in 2017, which will as well benefit the trading partners of these nations. World financing conditions remain favorable and commodity prices have stabilized. Against this improving international backdrop, increase in emerging market and developing economies as a whole will pick up to 4.1 % this year from 3.5 % in 2016.

Increase part the world’s seven major emerging market economies is estimate to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for increase in other emerging and developing economies and globally.

Nevertheless, substantial risks cloud the outlook. New trade restrictions could derail the welcome rebound in world trade. Persistent policy uncertainty could dampen confidence and investment . Amid exceptionally low financial market volatility, a sudden market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence. Over the longer term, persistently weak productivity and investment increase could erode long-term increase prospects in emerging market and developing economies that are key to poverty reduction.

"For too long, we’ve seen low increase hold back evolution in the fight against poverty, so it is encouraging to see signs that the world economy is gaining firmer footing,” World Bank Group President Jim Yong Kim said. “With a fragile but real recovery presently underway, nations should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain increase in the long-term. Nations must as well continue to invest in people and build resilience against overlapping challenges, inclunding climate change, conflict, forced displacement, famine, and disease.”

The statement highlights concern about mounting deficit and deficits part emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions may be damaging. At the end of 2016, government deficit exceeded its 2007 level by additional than 10 % points of GDP in additional than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by additional than 5 % points of GDP in one-third of these nations.

“The reassuring news is that trade is recovering,” said World Bank Chief Economist Paul Romer. “The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector.”

A bright spot in the outlook is a recovery in trade increase to 4 % next a post-financial crisis low of 2.5 % last year. The statement highlights a key area of weakness in world trade, trade part firms not linked through ownership. Such trade through outsourcing channels has slowed much additional sharply than intra-firm trade in recent years. This is a reminder of the importance of a healthy world trading network for the less integrated firms that account for the majority of enterprises.

“Next a prolonged slowdown, recent acceleration in activity in some of the major emerging markets is a welcome development for increase in their regions and for the world economy,” said World Bank Development Economics Prospects Director Ayhan Kose. “Presently is the time for emerging market and developing economies to assess their vulnerabilities and strengthen policy buffers against adverse shocks.”

Regional Outlooks:

East Asia and Pacific: Increase in the region is projected to relieve to 6.2 % in 2017 and to 6.1 % in 2018 as the gradual slowdown in China is offset by a pickup elsewhere led by a rebound part commodity exporters and accelerating increase in Thailand. Increase in China is anticipated to slow to 6.5 % this year and 6.3 % in 2018. Excluding China, the region is seen advancing at a additional rapid 5.1 % rate in 2017 and 5.2 % in 2018. Indonesia is anticipated to pick up to 5.2 % in 2017 and 5.3 % in 2018 as the effects of fiscal consolidation dissipate and as private activity picks up, supported by modestly rising commodity prices, improving external request, and increased confidence due to reforms. Increase in the Philippines is estimate to hold steady at 6.9 % this year and the next, led by a pickup in public and private investment . Thailand should similarly maintain 3.2 % increase in 2017, accelerating to 3.3 % next year, supported by better public investment and recovering private consumption.

Europe and Central Asia: Increase in Europe and Central Asia is estimate to accelerate broadly to 2.5 % in 2017, and to 2.7 % in 2018, supported by continued recovery part commodity exporters and unwinding of geopolitical risks and domestic policy uncertainty in major economies in the region. Russia is expected to grow at a 1.3 % rate in 2017 next a two-year recession and by 1.4 % in 2018, with increase helped by gains in consumption. Kazakhstan is projected to expand at a 2.4 % rate this year and 2.6 % in 2018 as strengthening oil prices and an accommodative macroeconomic policy stance support economic activity. Part commodity importing economies, Turkey is projected to expand by 3.5 % in 2017, supported by accommodative fiscal policy, and by 3.9 % in 2018 as uncertainty abates, tourism recovers, and corporate balance sheets mend.

Latin America and the Caribbean: Increase in Latin America and the Caribbean is projected to strengthen to 0.8 % in 2017 as Brazil and Argentina emerge from recession and rising commodity prices support agricultural and energy exporters. Brazil is estimate to expand 0.3 % in 2017, with increase expected to pick up to a 1.8 % rate 2018, while increase in Argentina is projected to expand at a 2.7 % pace this year. Increase in Mexico is anticipated to moderate to 1.8 % in 2017, principally due to contracting investment stemming from uncertainty about U.S. economic policy, before accelerating to 2.2 % next year. A rising estimate for metal prices is expected to help Chile, where copper production should recover next a strike. Increase in Chile is estimate to accelerate modestly this year to a 1.8 % pace and to 2 % next year. In the Caribbean, rising tourism request underlies an expected acceleration in increase to 3.3 % in 2017 and 3.8 % in 2018.

Middle East and North Africa: Increase in the region is projected to fall to 2.1 % in 2017 as the adverse impact of Organization of the Petroleum Exporting Nations production cuts on oil exporters outweighs modestly improving conditions in oil importers. Increase is expected to pick up to 2.9 % in 2018, assuming a moderation of geopolitical tensions and an increase in oil prices. Increase in Saudi Arabia, the major economy in the region, is anticipated to relieve to 0.6 % as a result of the production cuts, before accelerating to a 2 % pace in 2018. The Islamic Republic of Iran is seen slowing to a 4 % rate before accelerating modestly to a 4.1 % pace in 2018 as limited spare capacity in oil production and difficulty in accessing finance weigh on the country’s increase. Egypt’s economy is estimate to moderate in the current fiscal year before steadily improving over the medium-term, supported by the implementation of business climate reforms and improved competitiveness.

South Asia: Increase in the region is estimate to pick up to 6.8 % in 2017 and accelerate to 7.1 % in 2018, reflecting a solid expansion of domestic request and exports. Excluding India, regional increase is anticipated to hold steady at 5.7 %, rising to 5.8 %, with increase accelerating in Bhutan, Pakistan, and Sri Lanka but easing in Bangladesh and Nepal. India is expected to accelerate to 7.2 % in fiscal 2017 (April 1, 2017 – March 31, 2018) and 7.5 % in next fiscal year. Pakistan is expected to pick up to a 5.2 % rate in fiscal 2017 (July 1, 2016 – June 30, 2017) and to 5.5 % in the next fiscal year, reflecting an upturn in private investment , increased energy supply, and improved security. Sri Lanka’s increase is estimate to accelerate to a 4.7 % rate in 2017 and 5 % in 2018, as international financial institution programs support economic reforms and boost private sector competitiveness.

Sub-Saharan Africa: Increase in Sub-Saharan Africa is estimate to pick up to 2.6 % in 2017 and to 3.2 % in 2018, predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances. However, per capita output is projected to shrink by 0.1 % in 2017 and to increase to a modest 0.7 % increase pace over 2018-19. At those rates, increase will be insufficient to achieve poverty reduction goals in the region, particularly if constraints to additional vigorous increase persist. Increase in South Africa is projected to rise to 0.6 % in 2017 and accelerate to 1.1 % in 2018. Nigeria is estimate to go from recession to a 1.2 % increase rate in 2017, gaining speed to 2.4 % in 2018. Increase in non-resource- intensive nations is anticipated to remain solid, supported by infrastructure investment , resilient services sectors, and the recovery of agricultural production. Ethiopia is estimate to expand by 8.3 % in 2017, Tanzania by 7.2 %, Côte d’Ivoire by 6.8 %, and Senegal by 6.7 %.