The World Bank said in a new report that global economic growth is expected to decline this year due to increased trade barriers and policy uncertainty, but a recession is not expected.
Growth will be nearly half a percentage point lower than expected at the start of the year, according to the Global Economic Prospects report.
“The global outlook is predicated on tariff rates close to those of late May prevailing,” the report notes.
The report comes in the midst of trade war between the United States and China, the two largest world economies. Top officials from the two countries are meeting in Europe to find a way forward.
Regarding the impact of the tariff uncertainty, the report says, “accordingly, pauses to previously announced tariff hikes between the United States and its trading partners are assumed to persist.”
The report debunks fears that a a global recession might set in amidst uncertainties but says the average global growth is on track to be the slowest of any decade since the 1960s.
According to the report, growth forecasts are being slashed in nearly 70 per cent of all economies, with the poorest countries most affected.
In most developing countries, nearly 60 per cent, growth should average 3.8 per cent in 2025 before reaching an average 3.9 per cent in the following two years – more than a percentage lower than the average in the 2010s.
The slowdown will impact efforts by developing countries in areas such as job creation, poverty reduction and closing income gaps with richer economies.
“The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep,” said Indermit Gill, Senior Vice President and Chief Economist.
The report calls for rebuilding trade relations as “economic cooperation is better than any of the alternatives – for all parties,” he said.
Iftikhar Ali is a veteran Pakistani journalist, former president of UN Correspondents Association, and a recipient of the Pride of Performance civil award
