Image

Global Economic Prospects

Slow Growth, Policy Challenges

Overview

Global Outlook

Global growth is expected to recover to 2.5 percent in 2020—up slightly from the post-crisis low of 2.4 percent registered last year amid weakening trade and investment. Nevertheless, downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions. Emerging market and developing economies need to rebuild macroeconomic policy space to enhance resilience to adverse shocks and pursue decisive reforms to bolster long-term growth.

Image

 
Image
Image

 

 

Regional Outlooks

Growth in almost all EMDE regions has been weaker than expected, reflecting downgrades to almost half of EMDEs. Activity in most regions is expected to pick up in 2020-21, but the recovery will largely depend on a rebound in a handful of large EMDEs, some of which are emerging from deep recessions or sharp slowdowns. Risks for all regions remain to the downside.

  • Image

    East Asia and Pacific

    Growth in the region is projected to ease to 5.7% in 2020, reflecting a further moderate slowdown in China to 5.9% this year amid continued domestic and external headwinds, including the lingering impact of trade tensions. Regional growth excluding China is projected to slightly recover to 4.9%, as domestic demand benefits from generally supportive financial conditions amid low inflation and robust capital flows in some countries (Cambodia, the Philippines, Thailand, and Vietnam), and as large public infrastructure projects come onstream (the Philippines and Thailand). Regional growth will also benefit from the reduced global trade policy uncertainty and a moderate, even if still subdued, recovery of global trade.
  • Image

    Europe and Central Asia

    Regional growth is expected to firm to 2.6% in 2020, assuming stabilization of key commodity prices and Euro Area growth and recovery in Turkey (to 3%) and Russia (to 1.6%). Economies in Central Europe are anticipated to slow to 3.4% as fiscal support wanes and as demographic pressures persist, while countries in Central Asia are projected to grow at a robust pace on the back of structural reform progress. Growth is projected to firm in the Western Balkans to 3.6% -- although the aftermath of devastating earthquakes could weigh on the outlook -- and decelerate in the South Caucasus to 3.1%.
  • Image

    Latin America and the Caribbean

    Regional growth is expected to rise to 1.8% in 2020, as growth in the largest economies strengthens and domestic demand picks up at the regional level. In Brazil, more robust investor confidence, together with a gradual easing of lending and labor market conditions, is expected to support an acceleration in growth to 2%. Growth in Mexico is seen rising to 1.2% as less policy uncertainty contributes to a pickup in investment, while Argentina is anticipated to contract by a slower 1.3%. In Colombia, progress on infrastructure projects is forecast to help support a rise in growth to 3.6%. Growth in Central America is projected to firm to 3% thanks to easing credit conditions in Costa Rica and relief from setbacks to construction projects in Panama. Growth in the Caribbean is expected to accelerate to 5.6%, predominantly due to offshore oil production developments in Guyana.
  • Image

    Middle East and North Africa

    Regional growth is projected to accelerate to a modest 2.4% in 2020, largely on higher investment and stronger business climates. Among oil exporters, growth is expected to pick up to 2%. Infrastructure investment and business climate reforms are seen advancing growth among the Gulf Cooperation Council economies to 2.2%. Iran’s economy is expected to stabilize after a contractionary year as the impact of US sanctions tapers and oil production and exports stabilize, while Algeria’s growth is anticipated to rise to 1.9% as policy uncertainty abates and investment picks up. Growth in oil importers is expected to rise to 4.4%. Higher investment and private consumption are expected to support a rise to 5.8% in FY2020 growth in Egypt.
  • Image

    South Asia

    Growth in the region is expected to rise to 5.5% in 2020, assuming a modest rebound in domestic demand and as economic activity benefits from policy accommodation in India and Sri Lanka and improved business confidence and support from infrastructure investments in Afghanistan, Bangladesh, and Pakistan. In India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow to 5% in FY 2019/20, which ends March 31 and recover to 5.8% the following fiscal year. In Pakistan’s growth is expected to rise to 3% in the next fiscal year after bottoming out at 2.4% in FY2019/20, which ends June 30. In Bangladesh, growth is expected to ease to 7.2% in FY2019/2020, which ends June 30, and edge up to 7.3% the following fiscal year. Growth in Sri Lanka is forecast to rise to 3.3%.
  • Image

    Sub-Saharan Africa

    Regional growth is expected to pick up to 2.9% in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters. The forecast is weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries. In South Africa, growth is expected to pick up to 0.9%, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers. Growth in Nigeria is expected to edge up to 2.1% as the macroeconomic framework is not conducive to confidence. Growth in Angola is anticipated to accelerate to 1.5%, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment. In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4%. In Kenya, growth is seen edging up to 6%.

Four Topical Issues

Image

Fading Promise: How to Rekindle Productivity Growth

Productivity growth, a primary source of income growth and driver of poverty reduction, has slowed more broadly and steeply since the global financial crisis than at any time in four decades. In emerging market and developing economies, the slowdown has reflected weakness in investment and moderating efficiency gains as well as dwindling resource reallocation between sectors. The pace of improvements in many key drivers of labor productivity—including education and institutions—has slowed or stagnated since the global financial crisis.

Four Topical Issues

Image

The Fourth Wave: Rapid Debt Buildup

There have been four waves of debt accumulation in the last 50 years. The latest wave, which started in 2010, has seen the largest, fastest, and most broad-based increase in debt among the four. While current low levels of interest rates mitigate some of the risks associated with high debt, previous waves of broad-based debt accumulation ended with widespread financial crises. Policy options to reduce the likelihood of crises and lessen their impact should they materialize include building resilient monetary and fiscal frameworks, instituting r... See More

Four Topical Issues

Image

Price Controls: Good Intentions, Bad Outcomes

The use of price controls is widespread in emerging market and developing economies. While sometimes used as a tool for social policy, price controls can dampen investment and growth, worsen poverty outcomes, cause countries to incur heavy fiscal burdens, and complicate the effective conduct of monetary policy. Replacing price controls with expanded and better-targeted social safety nets, reforms to encourage competition and a sound regulatory environment can be pro-poor and pro-growth.

Four Topical Issues

Image

Low for How Much Longer? Inflation in Low-Income Countries

Inflation in low-income countries has tumbled to a median of 3% in mid-2019 from 25% in 1994. The decline has been supported by more flexible exchange rate regimes, greater central bank independence, lower government debt, and a more benign external environment. However, to maintain low and stable inflation amid mounting fiscal pressures and the risk of exchange rate shocks, policymakers need to strengthen monetary policy frameworks and central bank capacity and replace price controls with more efficient policies.

Connect With Us

Connect With Us

Global Economic Prospects

1818 H Street, N.W. Washington, DC 20433 USA

Questions? Send us an email at prospects@worldbank.org.

Back to Top