Global Growth to Lose Momentum This Year, World Bank Says
The World Bank cut its forecasts for global growth in 2019 and 2020, citing a worsening set of factors from trade tensions to financial-market instability to currency challenges in a number of emerging markets.
The bank lowered its semiannual estimate of the global growth rate by 0.1 percentage point in both years, with cuts coming to the outlook for both advanced economies and emerging markets. The bank had previously expected most major economies to slow, and now expects that slowdown to be somewhat more significant.
The bank now sees global growth of 2.9% in 2019, and now says that the global economy grew by 3% in 2018; in June, it said the global economy would expand by 3.1% last year.
“When you think about the engines of the global economy, they’re all going to lose momentum,” said Ayhan Kose, the bank economist who leads the forecasts. The World Bank forecasts slowing growth in the U.S., the eurozone and China.
The bank’s forecasts add to evidence that the global economy is slowing and that the U.S. will be pulled lower by the international downdraft. The American economy had a robust 2018—indeed, the bank marked up its estimate of U.S. growth last year to 2.9% from a June estimate of 2.7%.
The bank now expects the U.S. to slow to 2.5% in 2019. By 2020, growth will be 1.7%, the bank estimates, a 0.3 percentage point cut from its June forecast.
Signs have grown that global economic weakness has already infected the U.S. stock market. Apple Inc., for example, slashed its quarterly revenue forecast for the first time in more than 15 years due to a downturn in Chinese iPhone sales. In December, U.S. factory activity experienced its largest one-month deceleration since the middle of last decade’s financial crisis, according to a Institute for Supply Management report released last week.
The bank sees China’s economy slowing to a growth rate of 6.2% in 2019 and 2020, down from 6.5% last year.
One cause of the global slowdown is a contraction in global trade volumes. The bank cut its estimate of trade volumes in 2018, 2019 and 2020 by about half a percentage point, compared with its previous forecasts in June.
The bank’s forecasts remain for a slowdown and not a recession. Mr. Kose noted that the outlook could improve if, for example, financial markets calm down on news that the Federal Reserve will be gradual in raising interest rates, or if some of the trade disputes that have depressed global activity were resolved.
Trade hasn’t been the only force weighing on the outlook. A handful of emerging markets—most notably Argentina and Turkey—experienced significant currency crises last year.
Emerging markets that export natural resources had been counting on an uptick in commodity prices to bolster their fortunes, but many commodity prices fell sharply in the final months of 2018.
The bank said that emerging markets should “brace for possible bouts of financial market stress.”
The World Bank publishes forecasts semiannually in June and January. Its latest round of forecasts are slightly more pessimistic than the most recent forecasts from the International Monetary Fund, which were released in October.
The bank and IMF use different weighting methods on their headline forecasts. Using the same weighting, the World Bank’s estimates for global growth were 0.1 percentage point lower than the IMF’s in 2018 and 0.2 points lower for 2019.