Global economic growth will be weaker than expected, announced the World Bank which considered the “uncertain economic environment” in the euro area and Japan and the ongoing difficulties in emerging markets decreased global growth forecast by 0.4 percentage points, from 3.4 percent to 3 percent.
“The world economy is still struggling to gain momentum as many high-income countries continue to grapple with the legacies of the global financial crisis,” wrote Kaushik Basu, World Bank Chief Economist and Senior Vice President.
The World Bank thus opted for the pessimistic scenario from the International Monetary Fund (IMF) that said the continuing US recovery and the drop in oil prices would likely foster global growth, though there will be “losers.” (All) this partly reflected a different, more difficult, global environment—with a somewhat deeper contraction and weaker global recovery,” acknowledged Basu in the latest Global Economic Prospects report.
“Risks to the outlook remain tilted to the downside, due to four factors,” Basu said: 1) persistently weak global trade, 2) the possibility of financial market volatility as interest rates in major economies rise on varying timelines, 3) the extent to which low oil prices strain balance sheets in oil-producing countries and 4) the risk of a prolonged period of stagnation or deflation in the Euro Area or Japan.
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