Global economic growth is forecast to ease to a weaker-than-expected 2.6% in 2019 before inching up to 2.7% in 2020. Growth in emerging market and developing economies is expected to stabilize next year as some countries move past periods of financial strain, but economic momentum remains weak.
“It is urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment,” said David R. Malpass. World Bank Group president.
International trade and investment have been weaker than expected at the start of the year, and economic activity in major advanced economies, particularly the Euro Area, and some large emerging market and developing economies has been softer than previously anticipated.
Growth in the emerging and developing world is expected to pick up next year as the turbulence and uncertainty that afflicted a number of countries late last year and this year recedes, the World Bank’s June 2019 Global Economic Prospects: Heightened Tensions, Subdued Investment reports.
The World Bank report notes that a number of risks could disrupt that delicate momentum: a further escalation of trade disputes between the world’s largest economies, renewed financial turmoil in emerging and developing economies, or a more abrupt deceleration of economic growth among major economies than is currently envisioned.
Of particular concern is a slowdown in global trade growth to the lowest level since the financial crisis ten years ago and a tumble in business confidence.
The report also notes that a further troubling aspect of the tepid economic pace is what it means for the poorest economies. Rapid economic growth in some low-income countries since the turn of the century reduced poverty, and many climbed to middle-income status. But what are the prospects for those countries that are still classified as low-income, based on having a per capita income of $995 or less in 2017?
The number of low-income countries has declined since 2001 from 64 to 34 in 2019, driven by the end of conflicts in several countries, debt relief, and trade integration with larger, economically more vibrant countries. However, the challenges to the remaining low-income countries are steeper than for those that have moved up.
Many of today’s low-income countries are starting from particularly weak income positions. Also, more than half of today’s low-income countries are affected by fragility, conflict and violence. And most of them are geographically disadvantaged by being isolated or landlocked, making trade integration tougher.