World Bank warns of potential negative global economic outlook for 2016

The World Bank has expressed concerns over the global economic outlook for 2016, as well as new threats to efforts to eliminate poverty in the developing world.

In its twice-yearly assessment of global economic prospects, the bank forecast only a modest increase in growth. The report also observed an increase in risks to the global economy.

However, the World Bank has predicted some more positive trends, with wealthy countries gaining some speed and the emerging economies improving more rapidly than in 2015 – although last year was regarded as a post-crisis low in terms of economic growth.

This year’s forecast of 2.9% for the global economy, whilst an improvement compared to 2015’s 2.4%, is still not a particularly robust figure. The forecast for developing countries is estimated at 4.8%.

The World Bank’s chief economist, Kaushik Basu, observed that there is greater divergence between emerging economies. He also confirms that the risks to the forecasts have increased in the last six months, ‘particularly those associated with the possibility of a disorderly slowdown in a major emerging economy’.

Whilst the economy he was referring to remained unnamed, it is widely assumed to be China.

The report also warns that weakness in these aforementioned major emerging economies may well pose a serious threat to hard-won gains in combatting poverty. It expresses serious concern that poverty will become increasingly concentrated in economies based on the exploitation of natural resources. Many of these countries are in sub-Saharan Africa, where rates of extreme poverty are already at dire levels. Even more concerning is the foreboding prediction that ‘even the limited gains in poverty reduction made over the past decade could rapidly reverse’.

It should be noted that these growth figures for the world and for specific groups of countries reported by the World Bank cannot be directly compared with the figures provided by the International Monetary Fund (IMF), as the two organisations utilise different methods of calculation. While the overall estimates differ, the variation is extremely minor.

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