The World Bank reduces to a 2.4% prediction of the worldwide increase in 2016

The perspectives from exporting and importing countries of basic products are distinctly different and raise the risks of results that could be less favorable than previously expected

WASHINGTON D.C., June 7th, 2016 The World Bank is reducing to a 2.4% prediction of  worldwide economic growth in 2016, with respect to the projected 2.9% this past January. This measure is a consequence of slow growth in advanced economics, persistent low prices of basic products, worldwide commercial flow, and a general reduction in capital flows.

According to the most recent updates of the report Worldwide Economic Perspectives from The World Bank, emerging markets, economies in development, and exporters are having trouble adapting to the reduction in prices of petroleum and other basic key products, and this represents the halfway point of downward revision. Projections indicate that these economies could increase scale at a rate of .04% this year, which represents a downward revision of 1.2 percentage points with respect to the projections made in January.

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“This slow increase highlights why it’s crucially important that countries apply politics oriented around driving economic growth and bettering the lives of people who linger in extreme poverty”, pointed out Jim Yong Kim, president of The World Bank. “Economic growth continues to be the most important method in reducing poverty, and because of this we should be deeply preoccupied with the slowing down of market growth in countries that export basic products, caused by the fall of prices in these products”.

“While advanced economies have difficulties gaining momentum, in most of the economies in Southern and Eastern Asia they are registering solid economic growth, the same goes for emerging economies that import basic products from around the world”, confirmed Kaushik Basu, first vice president and first economist of The World Bank. “Nevertheless, the rapid growth of private debt in various emerging economies in development indicates that it’s necessary to act with caution. After a period of rapid increase in debt it’s not unusual to observe unproductive lending banks, around a percentage of gross loans quadruples”.

In a context of lack of growth, the world economy faces grave risks, amongst those a deeper decrease in emerging markets, changes in the behavior of finance markets, a standstill in advanced economies, a period of low prices for basic products that is more drawn out than the previous, geopolitical risks in diverse parts of the planet, and a respective preoccupation in the effectiveness of monetary policy aimed at driving solid growth. In the report an instrument to quantify related risk related to worldwide perspectives was used for the first time and observed that currently they have increased more since the fall in price in January.

“The perspective flows of growth in emerging markets and economies in development could slow down or even reverse the advances that were achieved in order to arrive at the levels of income for advanced economies”, pointed at Ayhan Kose, director of The Group of Perspectives on Economic Development. “However, some emerging economies and development importers of basic products have managed to maintain constant growth or accelerated it more over the past three years”.

Regional Perspectives

Latina America and The Caribbean: According to prognostics in the region there was a registered contraction of 1.3% in 2016 after the decrease of .07% in 2015, the first time in more than three years that a recession was registered over two consecutive years. It’s anticipated that it will start to grow anew in 2017 while achieving a gradual drive until arriving at around 2.0% in 2018. Perspectives are different in different parts of the region. In South America they predict a contraction of 2.8% this year, followed by a recuperation in 2017. On the contrariety, the predictions of the subregion of Mexico, Central America, and The Caribbean are supported by strong bonds with The United States. Exports could rise to 2.7% and 2.6% respectively, in 2016 and even more in 2017, and 2018. The prediction for Brasil indicates a contraction of .04% in 2016 and indicates a recession continuing in 2017, in the context that the intend to apply more restrictive policies, unemployment rises, gross imports decrease, and uncertain policy reigns.

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SOURCEAidan McMorrow
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