Trade disruptions and sluggish investment helped drive global economic growth last year to its lowest level since the Great Recession. Even with the recent cease-fire in the U.S.-China trade war, the World Bank expects only a modest uptick in growth globally in 2020—if trade tensions don’t flare back up and spook investors again. These are among the key conclusions of the Bank’s latest Global Economic Prospects report.
Among the reasons for pessimism is that the “phase one” deal signed last week between the U.S. and China will not remove the tariffs on most U.S. imports from China. Meanwhile, continued weakness in their manufacturing sectors is expected to dampen growth prospects in the United States, other advanced countries and China. Moreover, the World Bank assesses that the potential threats to growth are more numerous than the potential upside surprises, with a particularly large question mark hanging over the stability of the trade truce between Washington and Beijing.
According to the report, average annual economic growth worldwide dropped from just over 3 percent of GDP in 2017-2018 to an estimated 2.4 percent in 2019. The World Bank’s economists expect a slight uptick in that figure, to 2.5 percent, in 2020, but the projected rebound is concentrated in a handful of relatively large emerging markets and developing countries. The Bank expects China to continue its slow, steady decline in GDP growth from 6.8 percent in 2017 to 5.7 percent in 2022. And if the forecast holds, U.S. growth could slow from 2.3 percent last year to 1.8 percent this year.