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World Bank’s 2017 Growth Outlook More Positive, 2016 Disappoints

World Bank’s 2017 Growth Outlook More Positive, 2016 Disappoints

Daniel Dubrovsky, Strategist

Talking Points:

  • The World Bank released their 2017 global growth forecasts
  • 2016 economic output grew 2.3%, the slowest since the global financial crisis
  • This year is expected to accelerate to a 2.7% pace, which would be fastest since 2015

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Shortly after the turn of the new year, the World Bank released their 2017 global growth forecasts. While the forthcoming year is expected to see a pick up, the assessment for 2016 reveals a disappointing outcome. According to the institution, global output was estimated to have increased by only 2.3 percent. This marks the slowest pace of expansion since the global financial crisis. However, 2017 is set to be a more positive year.

The World Bank said that 2017 global growth is expected to accelerate back to a 2.7 percent rate of growth. That is comparable to the pace recorded in 2015. Looking at the individual major countries, there are mixed views. US output is forecasted to rise to a 2.2 percent clip from 1.6 percent in 2016. These estimates do not incorporate the effect of policy proposals by the incoming US presidential administration however. US fiscal policies proposed by President-elect Donald Trump on the campaign trail could provide a bigger activity boost.

Meanwhile, the Euro-area is expected to expand 1.5 percent versus 1.6 percent last year; Japan is seen cooling pace to 0.9 percent versus 1.0 percent previously; and China will reportedly slow to 6.5 percent growth from 6.7 percent prior.

In aggregate, the World Bank said that the underperformance of the global economy in 2016 may give way to a moderate recovery in 2017. Fiscal stimulus in the major economies may provide strength to global growth. Substantial numbers of commodity-importing economies such as East Asia, the Pacific and South Asia are projected to continue experiencing solid growth. Latin America, the Caribbean, Europe and Central Asia are also expected to see accelerated growth.

Some scenarios that may undermine growth include emerging markets seeing major downward pressure due to weak investment. Also, unfulfilled policy expectations in major economies could in turn pose downside risk potential for 2017. Particularly, policy normalization in US could have significant adverse effect on emerging markets that rely heavily on external funding.

World Bank’s 2017 Growth Outlook More Positive, 2016 Disappoints

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