World Bank expects global economic growth of 3.1% in 2018
The World Bank’s Global Economic Prospects (GEP) forecasts a 3.1 per cent growth in the world’s economy in 2018, and it will be the first time since the economic crisis of 2008 that all major regions of the world are experiencing an uptick in economic growth.
“The current broad-based growth acceleration is a welcome trend and could be self-reinforcing. On the other hand, stepping outside the frame of short-term forecasting, the GEP observes that growth in investment and in total factor productivity (TFP) has been declining over the past five years,” the Bank notes.
Citing the impact of demographic trends, the Bank indicates that labor force growth has also been slowing in many parts of the world.
“This means that potential output—the amount the economy can produce if labor and capital were fully employed—would grow at a subdued pace in the future. The current demand-led recovery is likely to run up against supply constraints. The decline in TFP growth is particularly troubling since this has been a key source of rising living standards in many countries in the past,” it added.
The Bank states that growth in advanced economies is expected to moderate slightly to 2.2 per cent in 2018, as central banks gradually remove their post-crisis accommodation and as an upturn in investment levels off, adding that growth in emerging market and developing economies as a whole is projected to strengthen to 4.5 per cent in 2018, as activity in commodity exporters continues to recover.
The Bank states further that the slowdown in potential growth is the result of years of softening productivity growth, weak investment, and the aging of the global labor force.
The deceleration is widespread, affecting economies that account for more than 65 per cent of global GDP. Without efforts to revitalize potential growth, the decline may extend into the next decade, and could slow average global growth by a quarter percentage point and average growth in emerging market and developing economies by half a percentage point over that period, it said.
The World Bank Group President, Jim Yong Kim is quoted as sayin; “The broad-based recovery in global growth is encouraging, but this is no time for complacency. This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries’ productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity.”
Commenting, the World Bank Senior Director for Development Economics, Shantayanan Devarajan, said, “An analysis of the drivers of the slowdown in potential growth underscores the point that we are not helpless in the face of it.
Reforms that promote quality education and health, as well as improve infrastructure services could substantially bolster potential growth, especially among emerging market and developing economies. Yet, some of these reforms will be resisted by politically powerful groups, which is why making this information about their development benefits transparent and publicly available is so important.”
The Bank projects growth in the East Asia and Pacific region to slip to 6.2 per cent in 2018 from an estimated 6.4 per cent in 2017.
It anticipates growth in the Europe and Central Asia region to ease to 2.9 per cent in 2018 from an estimated 3.7 per cent in 2017, and projects growth in the Latin America and the Caribbean region to advance to 2 per cent in 2018, from an estimated 0.9 per cent in 2017, while growth in the Middle East and North Africa region is expected to jump to 3 per cent in 2018 from 1.8 per cent in 2017.
Growth in the South Asia region is forecast to accelerate to 6.9 per cent in 2018 from an estimated 6.5 per cent in 2017 and growth in sub-Saharan Africa is anticipated to pick up to 3.2 per cent in 2018 from 2.4 per cent in 2017.
Download the January 2018 Global Economic Prospects report.
By Emmanuel K. Dogbevi
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