Emerging markets to drive 2018 growth
Long term, a slowdown could worsen global living standards
13 January, 2018
The global economy is set to expand by 3.1% in 2018, slightly up from 3% last year and marking the first year since the 2008 Great Recession that it will near or achieve full growth potential, the World Bank said on 9 January. In an update of its twice-yearly economic report, the Bank however warned that the economic upswing this year was temporary, unless governments adopted policies that would focus on increasing workforce participation. The pace of world growth was expected to moderate to 3% in 2019 and 2.9% in 2020, it said.
Most of the growth will be driven by emerging economies, in particular commodity exporters, with growth rates for the group as a whole rising to around 4.5% in 2018 and an average of 4.7% in 2019 and 2020, the Bank said. By contrast, growth in developed economies is projected to slow to 2.2% in 2018, from 2.3% last year, as central banks gradually remove their post-crisis accommodation and investment levels off.
Global growth is predicted to peak this year, due to slowing productivity, weak investment and changing demographics, the Bank said. Prioritising productivity reforms could be one solution in the face of high employment and aging populations, the Bank's report said. Long term, a slowdown in growth could worsen global living standards and exacerbate poverty levels.
“Over the longer term, slowing potential growth - a measure of how fast an economy can expand when labour and capital are fully employed - puts at risk gains in improving living standards and reducing poverty around the world,” the Bank said in its January 2018 Global Economic Prospects.
The fastest-growing region in the world, according to the World Bank, is East Asia and the Pacific, with China's economy expected to grow at a 6.4% clip this year before slowing to 6.3% next year.
In poorer countries in Africa, Latin America, the Middle East and Asia, economic growth is expected to expand to 5.4% in 2018, as commodity prices firm, but not as much as previously expected. In Latin America, the strongest growth is expected to come from Panama at a clip of 5.6%, while Venezuela's economy is expected to contract 4.2% in 2018.
The Bank projected that global oil prices would average $58 a barrel in 2018, edging up to $59 per barrel in 2019.