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World Bank Report Confirms Fragile Global Economic Growth

New York (ABC Live):Global Economic Growth :The Report prepared by World Bank says that Global growth is projected to strengthen to 2.7 percent in 2017 and 2.9 percent in 2018-19, broadly in line with previous forecasts. Global manufacturing and trade have firmed, financing conditions remain benign, and commodity prices have generally stabilized.

Growth in emerging market and developing economies is expected to increase to 4.1 percent in 2017 and average 4.6 percent in 2018-19. The improvement is driven by diminishing obstacles to activity in commodity exporters and robust growth in commodity importers.

Risks to the outlook include increased restrictions to trade, the possibility of financial market disruptions, and, over the longer term, weaker potential growth. Emerging market and developing economies need to rebuild fiscal space and accelerate reforms that support investment, trade, and productivity.

Global growth: strengthening. Global growth is projected to strengthen to 2.7 percent in 2017 and 2.9 percent in 2018-19, as expected. In advanced economies, a modest investment-led recovery is underway, with growth picking up to 1.9 percent in 2017, from 1.7 percent in 2016, before moderating in 2018-19.

In emerging market and developing economies (EMDEs), growth is anticipated to recover to 4.1 percent in 2017, from a post-crisis low of 3.5 percent in 2016, and reach an average of 4.6 percent in 2018-19, as obstacles to growth in commodity exporters diminish, while activity in commodity importers remains robust .

Global trends: supportive. Global trade has gained momentum, following two years of pronounced weakness. The upswing is driven by strengthening investment in advanced economies, increased trade flows to and from China, and improved import demand from commodity-exporting emerging market and developing economies.

Nevertheless, slower trade liberalization, flagging value chain integration, and elevated trade policy uncertainty continue to weigh on the medium-term outlook. Global financing conditions remain benign, benefiting from improving market expectations about growth prospects. Commodity prices are expected to recover at a moderate pace, although oil price projections have been revised down, reflecting the prospect of increased U.S. shale oil production.

Commodity-exporting emerging market and developing economies: diminishing obstacles. Following near-stagnation over the past two years, growth in commodity exporters is projected to rise to 1.8 percent in 2017 and 2.7 percent in 2018 in a broad-based recovery.

However, lingering fiscal and external adjustment needs continue to dampen growth prospects in a number of countries. Longer-than-expected adjustment to low commodity prices and, to a lesser degree, lower oil price projections have resulted in forecast downgrades for a number of exporters.

Commodity-importing emerging market and developing economies: stable growth. Growth continues to be robust among commodity importers. Windfalls from the recent decline in commodity prices are waning, but accommodative policies are supporting domestic demand and a recovery in global trade is fueling export growth.

The forecast for growth in commodity importers remains stable, at an average of 5.7 percent in 2017-19. China’s gradual transition to slower but more sustainable growth continues as expected. 2 Low-income countries: recovering. Growth is rebounding in low-income countries as rising metals prices lift production in metal exporters and infrastructure investment continues in non-resourceintensive economies.

However, some low-income countries are still struggling with declining oil production, conflict, drought, and security and political challenges. Growth in low-income countries is expected to strengthen during 2017-19, as activity firms in commodity exporters. Risks to the forecast: tilted to the downside. Downside risks continue to dominate the outlook, despite the possibility of more expansionary fiscal policy in major advanced economies.

Escalating trade restrictions could derail a fragile recovery in trade and undo gains from past liberalization efforts. A further increase in policy uncertainty from already high levels could dampen confidence and investment. After a period of unusually low financial market volatility, market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence and contribute to swings in asset prices and capital flows in emerging market and developing economies.

A renewed slide in oil prices could set back the incipient recovery in oil exporters. Over the longer term, persistent weakness in productivity and investment growth could further erode potential growth. Policy priorities for emerging market and developing economies: restore fiscal space and accelerate reforms.

The adverse impact of the earlier fall in commodity prices on government budgets in commodity exporters is gradually dissipating, but fiscal space remains constrained in many emerging market and developing economies, suggesting the need for continued fiscal adjustment.

Investment and productivity growth in emerging market and developing economies has slowed steadily post-crisis, and reforms will need to accelerate to lift growth prospects. Policy priorities include structural measures to improve the business climate, to support investment in human and physical capital, and to enhance the regional and global trade integration of emerging market and developing economies. Greater trade openness has generally been associated with lower poverty in emerging market and developing economies, as well as graduation from low- to middle-income status.

About Pankaj Gupta

Pankaj Gupta is Charted Accountant by profession reports on Business and Industry for ABC Live since 2006 and remained instrumental in shaping ABC News & Info Services, the parent company owning, the ABC Live.

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