The World Bank has recently published a report titled “Global Economic Prospects: Heightened Tensions, Subdued Investment”. This report is a biannual release, with the last one hitting the public domain in January 2019. The aim of this article is to break down the findings and projections of the report in a factual, easy-to-understand manner.
Global Forecast
In this report, the World Bank has lowered the global growth prospects by 0.3% to 2.6% for the fiscal year of 2019-2020. This downgrade can be attributed to international trade and investment at the beginning of 2019 being weaker than anticipated. Despite this, the World Bank anticipates an upturn in global economies hereafter, predicting a potential growth rate of 2.8% in 2021.
Risks to Global Growth
Several risk factors could potentially hamper global growth. These risks include rising trade barriers, an accumulation of government debt, and slow progress in several major economies. Advanced economies are projected to experience a slowdown in 2019, especially within the Euro Area, due to sluggish investments and exports.
U.S. Growth and Policy Uncertainty
The U.S. is expected to see a decline in growth to 2.5% in 2019, a decrease from its earlier estimation of 2.9% in 2018. Moreover, the growth rate is predicted to further fall to 1.7% and 1.6% in 2020 and 2021 respectively. This can be put down to the uncertainty surrounding U.S. policies which are predicted to erode growth and investment. This erosion comes as protectionist actions negatively affect various industries and trading partners due to the existence of global value chains.
The Impact of Brexit
An instance of a ‘no-deal’ Brexit could severely impact the U.K., with repercussions felt to a lesser degree by its European trading partners, in case of disruptions and delays at the border.
India’s Economic Outlook for 2019-20
| Year | Economic Growth |
|---|---|
| 2019-20 | 7.5% |
| 2020-21 | 7.5% |
Uncertainty in the Indian-Pakistani relations
The World Bank maintained its forecast for India’s growth at 7.5% for the fiscal year of 2019-2020 and the succeeding years. However, it has warned that any re-escalation of tensions between India and Pakistan could increase uncertainty and affect investments in the region. It has highlighted that private consumption and investment are expected to benefit from strengthening credit growth amid a more accommodative monetary policy. This is in light of inflation having fallen below the Reserve Bank of India’s target.
Status of the Goods and Services Tax (GST) Regime
The report mentioned that India’s Goods and Services Tax (GST) regime is still in the process of being fully operational, which leads to some uncertainty about future projections of government revenues.