The World Bank cuts the global growth to a minimum since the crisis

The world economy grows at slower pace since I came out of the Great Recession. The World Bank estimated that the increase in 2019 has been just 2.4%, according

The World Bank cuts the global growth to a minimum since the crisis

The world economy grows at slower pace since I came out of the Great Recession. The World Bank estimated that the increase in 2019 has been just 2.4%, according to its statistical series, the data lowest level in a decade. And the outlook for this year is not much better. The institution that presides over David Malpass foresees a growth of 2.5%, two tenths less than in its predictions of June. This worsening of forecasts has been higher in the euro area: 1.4% to 1% in 2020.

The trade war between the united States and China and the weakening of the investment have weighed on the global economy and have made to grow in 2019, less than anticipated, says the World Bank in its Economic Prospects report published on the night of this Wednesday. The 2.4% increase in the past year, two tenths less than this international body forecast only six months before. The IMF had already warned last October that 2019 would be the year of lower growth in the world since the Great Recession.

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If in 2018 the world trade grew 4% in the past year, did a 1.4%: “[that Is] by far the rate weakest since the financial crisis.” For this year, the forecast is that transactions will grow 1.9%.

This spike will result in a slight improvement in global growth this year. Calculated the economists of the World Bank that the global GDP will increase by a tenth. But the situation is fragile. “The anticipated recovery may be stronger if political events are recent —that have reduced trade tensions— leading to a reduction of continued uncertainty. However, the risks to the downside, including a possible return of an escalation in trade tensions around the world, recessions in major economies and financial turmoil in developing countries”, warns the report, titled in this edition, slow Growth, and political challenges.

Evolution of the world economies

annual change in percent

7

6

5,7

China

5

Markets

emergent

4,4

4

3

Latin america

and Caribbean

2,6

2

1,7

USA

Economies

advanced

1,5

1

1,3

euro Zone

0,4

Japan

0

2017

2018

2019

2020

2021

2022

Source:World bank

THE COUNTRY

Evolution of the world economies

annual change in percent

7

6

5,7

China

5

Markets

emergent

4,4

4

3

Latin america

and the Caribbean

2,6

2

1,7

USA

Economies

advanced

1,5

1

1,3

euro Zone

0,4

Japan

0

2017

2018

2019

2020

2021

2022

Source:World bank

THE COUNTRY

Evolution of the world economies

annual change in percent

7

6

5,7

China

5

Markets

emergent

4,4

4

3

Latin america

and the Caribbean

2,6

2

1,7

USA

Economies

advanced

1,5

1

1,3

euro Zone

0,4

Japan

0

2017

2018

2019

2020

2021

2022

Source:World bank

THE COUNTRY

The financial risk is reduced by the low interest rates, which in many cases become negative. According to the document, about 12 billion us dollars (by 10.8 billion euros), a quarter of the global debt, have yields to be negative. However, this only happens in Japan and Western Europe, says the World Bank.

This global situation, however, does not impact in the same way in all the world. The comprehensive revision of two tenths to the low in 2020, offers regional disparities. In the U.S., the outlook improves in a tenth for this year (1.8%) and in the other in 2021 (1.7 per cent). In the euro zone, in contrast, is lowered by four-tenths prediction for 2020 (1%) over the past summer, and is maintained for the next year (to 1.3%).

“Several economies [of Europe] are on the brink of recession, with particular weakness in the industrial sector German by the fall in asian demand and disruptions in the automotive sector. It also influences the growth of the uncertainties in the Brexit”, he says. “Interest rates negative in the continent could undermine more the profitability of the banks and erode the financial stability”, he adds.

The review is even more severe with the emerging countries, especially those of Latin America. The downgrade in Argentina has been the World Bank to expect a contraction in the economy of 1.3 per cent, a reduction of 3.5 points. In Mexico the reduction is about eight-tenths, and in Brazil, of five.

Less hard are the forecasts for China, which will continue to grow with a high pace, 5.9% this year, despite the cut of two-tenths of the forecasts. One of the main risks it points to is that “the effectiveness of the credit to stimulate the growth is going down [...]”. It also points to a possible increase in bankruptcies of local banks and the financial system in the shade. Despite all of this, the World Bank reduced the danger in China for “low dependence on external financing and the large capacity of the fiscal and monetary”.

The challenge to increase productivity

The World Bank warning of the poor performance of productivity because “their growth has been slowing”. In advanced economies, points to the financial institution, this is due to the weakness of investment and the ageing of the population. The slowing of the private investment would come because “the rise of protectionism and the uncertainty associated with” would have made companies more reluctant to investment “until the situation normalizes”.

To reverse this trend, calls for “a public investment that pursues an improvement of the growth, boost innovation and increase the human capital”. On the aging, notes that a partial solution could be the arrival of immigrants.

Updated Date: 09 January 2020, 00:00

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