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Global economy forecast gloomy as growth tipped at 2.7pc

By Protus Onyango | January 16th 2017

Global economic growth is forecast to accelerate moderately to 2.7 per cent this year, according to a new World Bank report.

This is after a post-crisis low last year as obstacles to trade recede among emerging markets and developing commodity exporters.

The World Bank’s January 2017 Global Economic Prospects Report, however, says domestic demand remains solid among emerging and developing commodity importers.

Growth in advanced economies is expected to edge up to 1.8 per cent in 2017.

Fiscal stimulus in major economies—particularly in the US—could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects.

The report says growth in emerging market and developing economies as a whole should pick up to 4.2 per cent this year from 3.4 per cent last year amid modestly rising commodity prices. The global lender said in the report the outlook is clouded by uncertainty about policy direction in major economies.

A protracted period of uncertainty could prolong the slow growth in investment that is holding back low, middle, and high income countries.

“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” said World Bank Group President Jim Yong Kim, adding that is high time to take advantage of the momentum and increase investments in infrastructure and people.

“This is vital to accelerating the sustainable and inclusive economic growth required to end extreme poverty,” said Kim.

Real GDP in sub-Saharan Africa is forecast to grow by 2.9 per cent this year, barely above population growth, and by 3.6 per cent in 2018.

The recovery is moderate because the region continues to adjust to lower commodity prices. Although rising through the medium-term, commodity prices will remain well below their post-global crisis averages.

Growth rates will continue to vary widely across the region, with growth in South Africa and in oil exporting nations weaker than in metal exporters, and growth in non-intensive resource countries remaining robust.

Private consumption growth in South Africa and oil exporters is expected to improve gradually. In South Africa, inflationary pressures and high unemployment will weigh on consumer spending. In Nigeria, ongoing exchange rate adjustment, coupled with the gradual improvement in oil prices, will provide a modest boost to domestic revenues.

This, in turn, should help the federal and state governments meet some of their financial obligations, including the clearance of salary arrears.

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