WASHINGTON – The World Bank has slashed its growth forecast for the world economy as well as for developed nations the United States and Japan. The revision Wednesday cited the impact of a continued slowdown in China and emerging markets.
In its latest semiannual Global Economic Prospects report, the Washington-based lender expects the global economy to grow 2.9 percent this year, down 0.4 percentage point from a projection it released in June last year. The figures relate to gross domestic product.
Kaushik Basu, chief economist of the World Bank, warned the global economy could face further deceleration if growth in China, Russia and other large economies falls short of current estimates.
“Disappointing growth again in the largest emerging markets, if combined with new financial stress, could sharply reduce global growth in 2016,” Basu said.
The bank cut its growth rate projection for Japan for this year by 0.4 point to 1.3 percent from the June forecast, citing weakness in exports and consumer-led domestic demand. In 2017, the growth pace will slow to 0.9 percent, down 0.3 point from the earlier estimate, it said.
“Sustained policy accommodation, and the prospect of higher earnings and record low unemployment, are positives for the outlook,” the report said.
It added: “The recovery remains fragile and dominated by downside risks.”
The bank expects the U.S. economy to expand 2.7 percent in 2016, down 0.1 point from the June forecast, and an unchanged 2.4 percent in 2017 on the back of improved labor markets and solid personal spending.
The Chinese economy is projected to grow 6.7 percent in 2016 and 6.5 percent in 2017 but the rate projection was slashed by 0.3 point and 0.4 point from the June report, respectively.
“A continued rebalancing from industry to services should support the shift from investment to consumption,” the report said, referring to Beijing’s efforts to push economic structural reforms.
The bank drastically cut its already severe outlook on the Russian economy, which is suffering from the effects of cheap oil and sanctions imposed by the United States and Europe over its actions in Ukraine.
Russia’s economy contracted 3.8 percent in 2015 and will keep shrinking in 2016 at a rate of 0.7 percent, down 1.4 points from the modest growth projected in June, the bank said.