A tentative pickup in the global economy this year is at risk from the political uncertainty unleashed by Brexit and the arrival of Donald Trump in the White House, the World Bank has said, according to The Guardian.
The Washington-based organisation said 2016 had been the weakest year for the global economy since the deep recession of 2008-09 and expressed concern that protectionist pressures would continue to increase unless the pace of activity picked up.
Announcing the findings of its annual Global Economic Prospects (GEP), the bank said global growth had failed to meet its forecast every year since 2011. A sluggish performance by the U.S. and recessions in large commodity-dependent economies kept expansion in the world economy to 2.3%, down from 2.7% in 2015.
The Bank said it expected a return to that level in 2017, adding that the tax cuts and public investment Trump has promised might result in faster growth. It stressed, however, that the impact of the president-elect’s fiscal boost could be offset by the aggressive trade policies he pledged during his election campaign.
“The heightened level of policy uncertainty, especially regarding trade, has been exacerbated by recent political developments – most notably in the United States and the United Kingdom”, the GEP said. “This and other risks – particularly financial market disruptions amid tighter global financing conditions – may be amplified over time by mounting protectionist tendencies, slower potential growth and elevated vulnerabilities in some emerging markets and developing countries.”
The World Bank said it had revised its growth forecasts for the UK in both 2017 and 2018 sharply down, despite the stronger than expected performance of the economy since the Brexit vote last June.
It left its 2016 UK growth forecast unchanged at 2%, but said it now expected the economy to expand by 1.2% this year and 1.3% in 2018, comparedwith the 2.1% predicted for both years before the referendum.
The Bank believes the uncertainty caused when the UK starts the two-year process of leaving the EU will increasingly weigh on both business and consumer confidence, with investment and spending decisions put off.
It said, however, that events in the U.S. would have a much bigger impact on the global economy.
“Because of the outsized role the United States plays in the world economy, changes in policy direction may have global ripple effects. More expansionary U.S. fiscal policies could lead to stronger growth in the United States and abroad over the near-term, but changes to trade or other policies could offset those gains,” said the World Bank’s director for development prospects, Ayhan Kose.
Rising oil prices are expected to help lift three leading commodity exporters – Brazil, Russia and Nigeria – from recession in 2017. Growth in advanced countries is predicted to rise from 1.6% to 1.8% as a result of a stronger U.S. performance.
“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” the bank’s president, Jim Yong Kim, said. “Now is the time to take advantage of this momentum and increase investments in infrastructure and people. This is vital to accelerating the sustainable and inclusive economic growth required to end extreme poverty.”