The bank, which gave the downward revision on Tuesday, explained that “International trade and manufacturing activity have softened, while trade tensions remain elevated, even as some large emerging markets have experienced substantial financial market pressures.”
The bank in its January 2019 Global Economic Prospects, said “Growth among advanced economies is forecast to drop to 2 percent this year.
“Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on outlook for emerging markets and developing economies.
“Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2 percent this year”.
The World Bank Chief Executive Officer, Kristalina Georgieva, said “At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead.
“As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardised. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”
The bank noted that the upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating, stressing that per capita growth will be insufficient to narrow the income gap with advanced economies in about 35 percent of emerging market and developing economies in 2019, with the share increasing to 60 percent in countries affected by fragility, conflict, and violence.
It disclosed that a number of developments could act as a further brake on activity, noting that a sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies.
Past increases in public and private debt, the World Bank observed, could heighten vulnerability to swings in financing conditions and market sentiment.
The bank warned that intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.