World Bank cuts global growth projections

OREANDA-NEWS. June 08, 2016. The World Bank cut its 2016 global growth forecast to 2.4pc because of sluggish growth in the US and other advanced economies and because of the economic challenges oil exporters face.

Exporters of oil and other commodities have struggled to adapt to lower prices, the World Bank said in an update to its Global Economic Prospects report. The organization in January forecast a 2.9pc growth rate globally this year, which compares with a 2.4pc rate last year.

The report projects oil prices at an average of \\$41/bl in 2016 and \\$50/bl in 2017. The World Bank cut its 2016 forecast — an average of Brent, West Texas Intermediate and Dubai — from a \\$51/bl projection used in the January report.

The World Bank cut its oil price forecast for the year, despite the recent rebound in prices, because "we are looking at the entire demand-supply dynamic, and the inventories are quite high," chief economist Kaushik Basu said.

The World Bank cut its US growth forecast to 1.9pc this year, down from a 2.7pc projection in January. The downgrade reflects slow growth in the first half of the year. "The year started in a very disappointing fashion, with energy and manufacturing" taking a hit, Basu said. Declining oil prices have led to a collapse of capital expenditure in the energy sector, but private consumption remains robust, the World Bank said.

The report cuts the Eurozone growth projection by 0.1 percentage points to 1.6pc, matching last year's increase.

"As advanced economies struggle to gain traction, most economies in south and east Asia are growing solidly, as are commodity-importing emerging economies," Basu said. The World Bank left China's projected 2016 growth rate unchanged at 6.7pc and slightly cut India's forecast to 7.6pc.

The economic downturn in Brazil is now expected to be more severe, with a projected decline of 4pc this year and another 0.2pc decline in 2017, following last year's 3.8pc contraction. The Latin American region as a result will contract by an estimated 1.3pc this year.

Russia's projected pace of economic decline is 1.2pc year, more than the previous estimate of a 0.8pc contraction this year. The downgrade in part reflects geopolitical concerns, including a flare-up of violence in eastern Ukraine.

The World Bank cited falling investment and stagnant domestic demand in sharply cutting growth projections in Africa's top oil producing nations, Nigeria and Angola, to 0.8pc and 0.9pc, respectively.

The forecast cuts growth projections in the Middle East to 2.9pc, from about 4pc previously. It cuts the projected growth rates for Saudi Arabia and Iran to 1.9pc and 4.4pc respectively. But Iran's recovery from the relief of the nuclear-related sanctions is expected to be the primary contributor to regional growth.