No major economic growth is to be expected this year as the continuing slowdown in the Chinese economy affects most commodities and Russia and Brazil continue to experience economic contractions, claims the World Bank.
Previously forecasting economic growth for this year at 3.3% in June, the World Bank has readjusted its prediction and lowered it to 2.9% according to the latest report. This is due to the global economy progressing more slowly than expected at 2.4% for 2015 coming in under both the June prediction of 2.8% and 2014’s growth of 2.6%.
This is now the fifth consecutive year that global economy growth has come in under 3%, with the worsening situation in emerging markets cited as one of the primary causes. The outlook for China’s economy in 2016 has been cut from growth of 7% to 6.7%, and only 6.5% is anticipated for 2017 showing that a further slowdown is expected. Other economies also saw cuts in their forecasts as it now anticipated that Brazil will contract by 2.5% while Russia’s economy will shrink by 0.7% this year.
Projections for the growth of the U.S. economy have also been slight adjusted, down from 2.8% to 2.7% according to the World Bank report. The main reason cited for the reduction is the rise in the value of the U.S. dollar which is already negatively affecting exports. Japan and the Euro Zone however, should continue with their fragile recoveries thanks to their less restrictive financial policies.
The report also projects that there will be a modest improvement in global economic growth as long as the Fed increases interest rates gradually and China turns to an economic model that is primarily driven by services and consumption. The best news is that, for now, global growth in 2017 is expected to be 3.1%.