The worrying slowdown
The World Bank has projected moderation of global growth from three per cent last year to 2.9 per cent this year, as it described the current situation of the world economy as ‘darkening of the skies’.
The World Bank has mainly attributed this phenomenon to the slowing of global growth and rising risks. The global economic growth is projected to soften from a downwardly revised 3 per cent in 2018 to 2.9 per cent in 2019 amid rising downside risks to the outlook.
The World Bank beelines that international trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.
It said growth among advanced economies is forecast to drop to two per cent this year. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies.
What is worrying is that the growth for this group is anticipated to hold steady at a weaker-than-expected 4.2 per cent this year. All this is happening as the global financing conditions have tightened, industrial production has moderated, trade tensions have intensified, and some large emerging market and developing economies have experienced significant financial market stress.
Besides, a sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies.
However, India’s economy is forecast to expand by 7.5 per cent during the 2019-20 fiscal year and retain its position as the fastest growing major economy in a world of slowing growth.
The Bank`s Global Economic Prospects (GEP) report released on Tuesday kept the forecasts made for India in its June report for the next fiscal year and the 7.3 per cent estimate for the current fiscal year, up from 6.7 per cent recorded in 2017-18.
However, the upcoming election cycle in the entire south Asian region can create a situation where political uncertainty is elevated which could adversely affect the ongoing reform agenda and economic activity in some countries.
The situation is presenting a challenge for all the emerging economies like those of India. The policy planners need to see the approaching troubles well in advance and start preparations for the same.
India’s economy has been grappling with issues like the implementation of GST and demonetization. The growth prospects had diminished after the government ook some controversial decisions that are taking a heavy toll on various sectors.
Now the World Bank’s warning can have a very deepening effect which needs to be cut down to minimum as economic and financial headwinds intensify for emerging and developing countries.