The World Bank has assured that the global economy would return a growth of 3.1 per cent in 2018, despite recent softening and headwinds. But it also warned in its June 2018 Global Economic Prospects, that after 2019, there would be a gradual slowdown over the next two years, as advanced- economies’ growth decelerates and the recovery in major commodity-exporting emerging market and developing economies levels off.
Nigeria, as part of the global economy and a major economy in the Sub-Saharan Africa, is currently benefitting from the positive outcome of the relatively stable global activities and would surely be part of the slowdown era ahead, if not well planned. “If it can be sustained, the robust economic growth that we have seen this year could help lift millions out of poverty, particularly in the fast-growing economies of South Asia.
“But growth alone won’t be enough to address pockets of extreme poverty in other parts of the world. Policymakers need to focus on ways to support growth over the longer run, by boosting productivity and labor force participation to accelerate progress toward ending poverty and boosting shared prosperity,” the World Bank Group President, Jim Yong Kim, said.
He said activity in advanced economies is expected to grow 2.2 per cent in 2018 before easing to a two per cent rate of expansion next year, as Central Banks gradually remove monetary stimulus.
“Growth in emerging market and developing economies overall is projected to strengthen to 4.5 per cent in 2018, before reaching 4.7 per cent in 2019, as the recovery in commodity exporters matures and commodity prices level off following this year’s increase.
“This outlook is subject to considerable downside risks. The possibility of disorderly financial market volatility has increased, and the vulnerability of some emerging market and developing economies to such disruption has risen. Trade protectionist sentiment has also mounted, while policy uncertainty and geopolitical risks remain elevated,” he said.
A Special Focus cautions that over the long run, the anticipated slowdown in global commodity demand could put a cap on commodity price prospects and thus on future growth in commodity-exporting countries. “The projected decline in commodities’ consumption growth over the long run could create challenges for the two-thirds of developing countries that depend on commodity exports for revenues. This reinforces the need for economic diversification and for strengthening fiscal and monetary frameworks,” the World Bank Senior Director for Development Economics, Shantayanan Devarajan, said.
Another Special Focus finds that elevated corporate debt can heighten financial stability concerns and weigh on investment.This includes some countries’ foreign currency debt, which has risen rapidly since the global financial crisis, making them more vulnerable to rising borrowing costs. “Policymakers in emerging market and developing economies need to be prepared to cope with possible bouts of financial market volatility as advanced-economy monetary policy normalisation gets into high gear.
“Rising debt levels make countries more vulnerable to higher interest rates. This underlines the importance of rebuilding buffers against financial shocks,” the World Bank Development Economics Prospects Director Ayhan Kose.