World Bank cuts global growth forecasts

The World Bank has cut its global economic growth forecast for this year to 2.9% from a 3.3% estimate in June, pointing to weak growth in major emerging markets.

The bank cut its outlook for Chinese growth in 2016 to 6.7% from 7% in June and said it now expects Brazil and China’s economies to contract 2.5% and 0.7%, respectively.

As far as the US is concerned, the World Bank downgraded its growth forecast for this year to 2.7%, which is up from 2015’s 2.5% growth but lower than its June estimate of 2.8%, highlighting the impact of the strong US dollar on exports.

Developing economies as a whole are seen expanding by 4.8% this year, less than expected earlier but up from a post-crisis low of 4.3% in the year just ended.

The World Bank said simultaneous weakness in most major emerging markets is a concern for achieving the goals of poverty reduction and shared prosperity because those countries have been powerful contributors to global growth for the past decade.

Spillovers from major emerging markets will constrain growth in developing countries and pose a threat to hard-won gains in raising people out of poverty, the bank warned in its January 2016 Global Economics Prospects report.

“More than 40% of the world’s poor live in the developing countries where growth slowed in 2015,” said World Bank Group President Jim Yong Kim.

"Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable. The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies."