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World Bank sees "Darkening Skies" in 2019

Wednesday 9th January 2019

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The World Bank is predicting global growth will slow this year due to headwinds that include tightening financing conditions, moderating industrial production and intensifying trade tensions.

In its semi-annual report on the outlook for the global economy entitled “Darkening Skies,” the World Bank says global growth may slow to 2.9 percent in 2019 from an estimated 3 percent last year and slow further, to 2.8 percent, in 2020.

“Moderating activity and heightened risks are clouding global economic prospects. International trade and investment have softened, trade tensions have intensified and some large emerging market and developing economies are experiencing substantial financial market pressures,” it says.

It is forecasting that growth in the US economy will slow from 2.9 percent in 2018 to 2.5 percent this year and 1.7 percent in 2020. Growth in Europe will slide from 1.9 percent to 1.6 percent.

It is forecasting China’s economy will slow from 6.5 percent in 2018 to 6.2 percent this year.

The bank says growth in emerging markets has lost momentum “with a weaker-than-expected recovery in commodity exporters accompanied by a deceleration in commodity importers” and downside risks have become more acute.

“Disorderly financial market developments could disrupt activity in the affected economies and lead to contagion effects,” the report says.

“Trade disputes could escalate or become more widespread, denting activity in the involved economies and leading to negative global spillovers.”

The report coincides with talks in Beijing between US and Chinese officials, who are trying to resolve or reduce their countries’ trade dispute, and which have entered an unscheduled third day. US President Donald Trump has been tweeting that the negotiations are “going very well.”

Bloomberg is reporting that Trump wants to strike a deal with China in the hopes that will perk up flagging share markets.

The broad measure of US stocks, the S&P 500 Index has dropped about 8 percent since Trump and China’s president-for-life, Xi Jinping, agreed a 90-day truce at a Dec. 1 meeting in Argentina.

Unless the talks are fruitful, Trump is planning to increase US tariffs on about US$200 billion of Chinese goods from 10 percent to 25 percent.

The World Bank report didn’t provide any specific economic forecasts for Australia or New Zealand.

(BusinessDesk)

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