In a broad-based upturn, global economy grew at 3 per cent in 2017, its strongest rate since 2011, according to the World Bank. Global economic growth is predicted to edge up to 3.1 per cent in 2018, owing to a continued recovery in emerging market and developing economies (EMDEs) more than offsetting a slight moderation in advanced economies.

EMDE growth is projected to strengthen to 4.5 per cent in 2018 in a supportive global environment, as headwinds to activity in commodity exporters gradually dissipate and growth in commodity importers remains robust, the Bank said in its latest report ‘Global Economic Prospects: Broad-based upturn, but for how long?’

“The global outlook is still subject to downside risks, including the possibility of financial stress, increased protectionism, rising geopolitical tensions, and, over the longer term, weaker potential growth,” says the report.

“With output gaps closing or closed in many countries, accommodative cyclical policies are becoming less urgent. Given the prospects for a continued softening of potential growth, structural reforms that spur long-term growth, investment, and productivity should take priority,” it adds.

The World Bank forecasts advanced economies to moderate slightly to 2.2 per cent in 2018, as central banks gradually remove their post-crisis accommodation and the upturn in investment growth stabilises.

The report states that the risks to the forecast are more balanced but still on the downside. Risks to the global outlook are becoming more balanced, mainly due to the possibility of stronger-than-expected growth in the largest advanced economies and EMDEs. However, downside risks continue to predominate. “A sudden increase in borrowing costs, triggered by a reassessment of the pace of advanced-economy monetary policy normalisation or rising concerns about elevated asset valuations, could lead to financial stress and disrupt capital flows to EMDEs.”

Escalating trade restrictions could derail the recovery in trade and undo gains from past liberalisation efforts. Over the longer term, a more pronounced slowdown in potential output growth in both advanced economies and EMDEs would make the global economy more vulnerable to shocks and worsen prospects for improved living standards, the report warns. (RKS)

Fibre2Fashion News Desk – India

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