World Bank cuts 2016 forecast for global economy to just 2.9 per cent

WASHINGTON - The World Bank has cut its forecast for global growth this year given weakness in the developing world.

See Full Article

The aid agency said Wednesday that it expects the world economy to expand 2.9 per cent in 2016, down from the forecast of 3.3 per cent it made in June. The global economy grew 2.4 per cent in 2015.

Several big developing economies -- including Brazil and China -- are slowing or shrinking. Their troubles have disproportionately hurt their smaller trading partners, which have also been squeezed by depressed commodity prices.

The World Bank expects developing countries to collectively grow 4.8 per cent, up from a six-year low 4.3 per cent in 2015. China, the world's second-biggest economy, is expected to register 6.7 per cent growth, down from 6.9 per cent in 2015 and the slowest pace since 1990.

The economic prospects of advanced economies appear to be brightening as the developing world struggles. The World Bank expects the U.S. economy to grow 2.7 per cent this year, up from 2.5 per cent in 2015 and the fastest pace since 2006.

The agency foresees the 19-country eurozone economy expanding 1.7 per cent, up from 1.5 in 2015 and fastest since 2011. And it expects the Japanese economy, lifted by the Bank of Japan's easy-money policies, to grow 1.3 per cent, up from 0.8 per cent in 2015.

Since the 2008 financial crisis and the Great Recession, the World Bank, the International Monetary Fund and others have frequently overestimated the strength of the world economy and have later had to downgrade their initial predictions.

The World Bank's 2016 forecast involves two key optimistic assumptions for global growth: That commodity prices will stabilize after plummeting in 2015. And that the Chinese government will keep growth in the world's second-biggest economy from imploding as it manages a difficult transition away from fast but unsustainable growth based on excessive investment in factories and real estate.

"China is going to continue slowing in an orderly fashion," says World Bank economist Ayhan Kose, who helped put together the forecast.

The agency also assumes that the Federal Reserve's interest-rate hike last month -- and any further rate hikes -- won't damage the U.S. economy or cause much turmoil in financial markets.

Its outlook differs from region to region and country to country.

Latin America, forecast to grow just 0.1 per cent this year, has been especially hard hit by falling commodity prices. Brazil's economy, once an emerging powerhouse, is forecast to drop 2.5 per cent this year after shrinking 3.7 per cent in 2015.

The Russian economy, squeezed by low oil prices and international sanctions, is expected to slide 0.7 per cent this year on top of a 3.8 per cent drop last year.

The Iranian economy, which is getting relief from economic sanctions after reaching a nuclear deal with the Obama administration, is forecast to surge 5.8 per cent this year, up from 1.9 per cent in 2015.

The oil-importing countries of South Asia are expected to benefit from lower energy prices. The World Bank predicts that India will grow 7.8 per cent, Pakistan 5.5 per cent and Bangladesh 6.7 per cent.

The countries of sub-Saharan Africa are expected to grow 4.2 per cent, up from 3.4 per cent last year. But the World Bank expects wide disparities among African countries. South Africa, for instance, is forecast to grow just 1.4 per cent, while Ethiopia is expected to expand 10.2 per cent and Rwanda 7.6 per cent.



Advertisements

Latest Economic News

  • Italian PM 'guarantees' savers' accounts in 2 troubled banks

    Economic CTV News
    ROME -- Italy's premier says holders of accounts in two troubled Italian banks will have their savings guaranteed despite insolvency proceedings. Premier Paolo Gentiloni was referring to Veneto Banca and Banca Popolare di Vicenza, each struggling with unpaid loans. Source
  • Forget the poop scooping: who will pay the bills for your pet?

    Economic CBC News
    The scene is so common, it's cliché: Your adorable child looks longingly into your eyes, begging for a pet. You somehow navigate the emotionally fraught minefield of cat vs. dog. Then it's time to talk chores. Source
  • Ivanka Trump ordered to testify in dispute with shoe company

    Economic CTV News
    NEW YORK -- Ivanka Trump must testify in a dispute with an Italian shoemaker over one of her company's shoe designs, a judge said Friday. U.S. District Judge Katherine Forrest rejected a request by the senior White House aide's lawyers that she be blocked from submitting to a deposition in the trademark infringement lawsuit brought by Aquazzura Italia SRL against her and her company IT Collection LLC. Source
  • Cooling measures already affecting hot Toronto housing market: survey

    Economic CTV News
    The recent intervention by the Ontario government to cool the Toronto-area’s hot housing market is already having an impact on sellers and buyers plans for the year, according to a new poll. At the end of April, Ont. Source
  • Why is the American teen summer job disappearing? [Video]

    Economic Toronto Sun
    WASHINGTON — It was at Oregon’s Timberline Lodge, later known as a setting in the horror movie “The Shining,” where Patrick Doyle earned his first real paycheque. He was a busboy. The job didn’t pay much. But Doyle quickly learned lessons that served him for years as he rose to become the CEO of Domino’s, the pizza delivery giant: Source
  • Waiting for a Canadian housing crash? Warren Buffet bets against it buying 38% stake in Home Capital Group Inc.

    Economic Toronto Sun
    Warren Buffett's deal to back Home Capital Group Inc. does more than support a struggling mortgage lender -- it's a vote of confidence for a housing market that everyone from investors to global ratings companies say is a bubble ready to burst. Source
  • CIBC looks to generate quarter of earnings from U.S.

    Economic CBC News
    CIBC closed its acquisition of Chicago-based PrivateBancorp on Friday, securing its foothold in the U.S. where CEO Victor Dodig said the bank hopes to one day generate a quarter of its earnings. The Canadian bank now earns roughly five per cent of its profits in the U.S. Source
  • CIBC closes acquisition of U.S.-based PrivateBancorp

    Economic CTV News
    TORONTO -- CIBC closed its acquisition of Chicago-based PrivateBancorp on Friday, securing its foothold in the U.S. where CEO Victor Dodig said the bank hopes to one day generate a quarter of its earnings. The Canadian bank (TSX:CM) now earns roughly five per cent of its profits in the U.S. Source
  • Consumer demand for debt as high as it has ever been, Equifax says

    Economic CBC News
    Canadians' appetite for debt is as insatiable as ever, a new report from credit monitoring firm Equifax says. Equifax calculates that Canadian consumers owed $1.729 trillion at the end of the first quarter, an increase of 6.9 per cent in a year. Source
  • Sears Canada store closures expected to have little impact on RioCan

    Economic CTV News
    NEW YORK -- Sears is closing another 20 stores as the ailing retailer tries to turn around its business. Real estate investment trust Seritage, which owns the 20 real estate properties, confirmed the closings-- 18 Sears stores and two Kmart stores -- in a government filing Friday. Source