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World Bank Cuts Global Growth Forecasts


The World Bank lowered its global growth projections as rising trade protection could have adverse effects after the U.S. President elect Donald Trump takes office this month.

According to the Global Economic Prospects report of the World Bank, the global economy will grow 2.7 percent this year instead of 2.8 percent projected in June last year. Going forward, growth was expected to be 2.9 percent each in 2018 and 2019.

Growth in the United States was expected to pick up to 2.2 percent, as manufacturing and investment growth gain traction after a weak 2016. The outlook for this year was left unchanged. Growth for 2018 was seen at 2.1 percent.

Because of the outsize role the United States plays in the world economy, changes in policy direction may have global ripple effects, World Bank Development Economics Prospects Director Ayhan Kose cautioned.

More expansionary U.S. fiscal policies could lead to stronger growth in the United States and abroad over the near-term, but changes to trade or other policies could offset those gains, Kose added.

Growth in the 19-nation euro area was expected to slow to 1.5 percent this year, before slowing slightly to 1.4 percent next year.

Uncertainty about the 'Brexit' process is expected to weigh on growth in the U.K. during 2017-18, the Washington-based lender said. However, the bank observed that the EU referendum had limited short-term cross-border financial market spillovers.

Growth in emerging market and developing economies as a whole should pick up to 4.2 percent this year from 3.4 percent in the year just ended amid modestly rising commodity prices.

China was projected to continue an orderly growth slowdown to a 6.5 percent this year and 6.3 percent in 2018. Macroeconomic policies are expected to support domestic drivers of growth despite soft external demand, weak private investment, and overcapacity in some sectors.

India was forecast to register a 7.6 percent growth rate in FY2018 as reforms loosen domestic supply bottlenecks and increase productivity. The rate was forecast to improve to 7.8 percent in the fiscal year 2019.

by RTT Staff Writer

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