World Bank Cuts Global Growth Outlook To 3-Year Low On Trade War Risks

The World Bank downgraded its global growth outlook to the weakest pace in three years, citing downturn in investment and a decade-low growth in trade, amid escalating disputes.

Global growth is forecast to ease to 2.6 percent this year, reflecting weaker-than-expected trade and investment, the lender said in its semi-annual Global Economic Prospects report, released Wednesday.

Growth is projected to gradually rise to 2.7 percent in 2020 and to 2.8 percent in 2021, assuming that benign global financing conditions and a moderate recovery in emerging market and developing economies will continue.

The 2019 growth outlook was revised down from 2.9 percent and the 2020 estimate from 2.8 percent.

Despite slowing to its lowest pace in three years, the global economic growth is on track to stabilize, the World Bank said, adding that the momentum is fragile and subject to substantial risks.

The bank cautioned that risks to the outlook remain firmly on the downside. The major concern is a slowdown in global trade growth to the weakest since the financial crisis ten years ago and a weakening in business confidence.

U.S. growth is expected to slow to 2.5 percent in 2019 and further decelerate to 1.7 percent in 2020 and 1.6 percent in 2021. The lender left projections unchanged from January.

Euro area growth outlook for 2019 was downgraded to 1.2 percent from 1.6 percent and that for next year to 1.4 percent from 1.5 percent. The outlook for 2021 was retained at 1.3 percent.

The emerging and developing world growth is expected to pick up next year as the turbulence and uncertainty that affected number of countries in 2018 recedes this year. Rising debt level is a serious risk, the bank observed.

Growth in the emerging market and developing economies is forecast to pickup to 4.6 percent in 2020-21 from a four-year low of 4 percent in 2019. The outlook for this year was trimmed from 4.3 percent estimated in January.

The bank forecast India's growth to remain at 7.5 percent in 2019, 2020 and 2021, unchanged from January projection.

The lender expects China's economy to expand 6.2 percent this year, unchanged from the prior projection. The outlook for next year was revised down to 6.1 percent from 6.2 percent.

"Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential," World Bank Group President David Malpass said.

Elsewhere, the International Monetary Fund downgraded China's growth projection as renewed trade tensions weigh on sentiment. Growth is expected to moderate to 6.2 percent and 6.0 percent in 2019 and 2020. The outlook for 2019 was trimmed from 6.3 percent.

Uncertainty around trade tensions remains high and risks are tilted to the downside, IMF said.