World Bank revises down forecast for global growth

07 de junho de 2016

São Paulo – The World Bank (IBRD) cut down its forecast for the growth of the global economy in 2016. According to an update of the report Global Economic Prospects, released this Tuesday (7), the global Gross Domestic Product (GDP) should climb 2.4% this year. In the report’s previous edition, released in January, the estimation showed a 2.9% growth.

According to the institution, the review considered the slow growth of the developed economies, the prices of commodities “stubbornly” low, the weak global trade and the retraction of capital flows.

The low price of commodities and its impact in commodity-exporting developing economies account for half of the decline of the global GDP in the estimation, according to the bank. Brazil, as exporter of agricultural and mineral items, and Arab nations, as oil exporters, are included in this group.

IBRD expects the commodity-exporting developing economies to grow 0.4% this year on average. This means a reduction of 1.2 percentage point over January’s forecast.

“Economic growth remains the most important driver of poverty reduction, and that’s why we’re very concerned that growth is slowing sharply in commodity-exporting developing countries due to depressed commodity prices”, said the bank’s president, Jim Yong Kim, in a statement.

In the case of Brazil, besides the low price of commodities, the bank points out to other problems such as the economic squeeze due to the fiscal adjustment, the increase of the unemployment rate, the decline of real income and political uncertainties. The country is going through a moment of political instability with president Dilma Rousseff being suspended due to an impeachment process and with vice-president Michel Temer now heading the government. The process in ongoing in the Senate and the final decision should be known in August.

In this scenario, IBRD sees a recession of 4% in Brazil this year. In January, the bank, in its previous forecast, called for a 2.5% shrinkage for 2016 and the resume of growth in 2017. Now, the report calls for a negative result also for next year at -0.2%. “If political uncertainties persist, the implementation of fiscal initiatives may be delayed, further weighing on investment”, says the report. “Recessions in Brazil and República Bolivariana de Venezuela have yet to bottom out and could last longer than previously expected. There is a risk that these recessions may spill over to other countries in the region (Latin America)”, it adds.

For the Middle East and North Africa, the World Bank believes in an average growth of 2.9% this year. The estimation is 1.1 percentage point lower than the one made in January and is based in the price of the oil barrel remaining in a level considered to be low, USD 41 on average per barrel. The growth expected reflects largely the expectations for Iran’s economic recovery after the lifting of the economic sanctions that were being enforced on the Persian country.

In 2017, however, IBRD believes that a recovery of oil prices will take place, which should drive the growth to 3.5%. The bank expects a growth, this year and the next, in all of the 17 economies of the region surveyed. Included in this list are 16 Arab nations plus Iran. Not included are the Arab countries of Syria, Yemen, Mauritania, Sudan and Comoro Islands.

*Translated by Sérgio Kakitani