The World Banks semi-annual Global Economic Prospect report titled Darkening Skies has warned that the US/China trade war is already inflicting collateral damage and government and corporate debt is slowing down economic growth.
The bank has predicted that growth will soften slightly over the year from three per cent in 2018 to 2.9 per cent in 2019 amid rising risks.
Growth among advanced economies is predicted to drop to two per cent this year while growth in emerging markets is predicted to hold steady at 4.2 per cent.
The East Asian and Pacific region is prediction to remain one of the fastest-growing developing regions with growth of six per cent expected, meanwhile China’s growth is expected to slow down to 6.2 per cent this year.
The US is also predicted to slow down to 2.5 per cent in 2019, down 0.4 percentage points from 2.9 per cent in 2018.
Meanwhile the Euro area is predicted to slow to 1.9 per cent.
World Bank’s group chief executive officer Kristalina Georgieva said that 2019 would be a tougher year for global markets than the previous twelve months.
“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,” she said.
Ms Georgieva said several developments could still act as a brake on activity and that countries needed to continue investments to keep momentum.
Some of the potential developments according to the report were sharper tightening in borrowing costs which could depress capital inflows and lead to slower growth, and past increases in debt that could heighten vulnerability to swings in financing conditions and market sentiment.
“As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardized. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies,” said Ms Georgieva.
