Global economic growth is likely to be only slightly faster this year than the weak performance seen in 2019, according to a World Bank forecast.
The world economy is likely to expand by 2.5 per cent in 2020, up from 2.4 per cent last year, the bank’s economists predict.
That reflects an expected recovery in some emerging and developing countries that had a difficult 2019
But it will be offset by slower growth in the United States and some other developing nations.
“Growth in 2019 was the slowest since the financial crisis. And the moderate forecast for this year is beset with uncertainty,” the report said.
It depends on a substantial improvement in some large emerging and developing economies. India is predicted to rebound after a marked slowdown in growth last year.
Brazil should grow somewhat more strongly after a period of weakness. Mexico and Turkey should see growth after recording none for 2019 as a whole. Argentina’s economy will continue to contract but more slowly than in the last two years.
The forecast suggested that economic activity in Iran would stop declining this year with growth returning in 2021.
But even then it won’t, if the bank’s forecasts are borne out, be a strong recovery. And the political tensions and violence that have erupted in the last few days could easily undermine that.
The bank warned of risks to this outlook. Iran is a reminder that conflict in the Middle East is an ever present danger that can have economic consequences.
The report was written before those events took place.
Even so, the report said: “The disruption in Saudi oil production in mid-September highlights the potential for renewed tensions in the Middle East.”
Franziska Ohnsorge, a World Bank economist and one of the authors of the report, said these problems could feed through to emerging and developing economies through higher oil prices.
There have been occasions in the past when problems in the Middle East have led to higher oil prices and even contributed to a global recessions.
That said, Ms Ohnsorge noted two factors that could help moderate how oil prices respond: the fact that the oil producers’ group Opec has been restricting production and could reverse that action.
In addition, the US shale oil industry, which is a relatively new factor in the global market, can increase production much more rapidly than traditional ways of getting oil.
Trade tensions are another potential trouble spot for global growth. They could “re-escalate”, as the report puts it. There have been signs of movement in the US-China dispute. The two sides have made what President Trump calls a phase one deal, but it is far from fully resolved.
The bank seems to be acutely aware that progress could be easily reversed and other trade tensions could arise.
There is also a concern about a rapid build-up of debt in emerging economies.
The bank said a wave of debt accumulation began after the global financial crisis.