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World Bank Group cuts global growth estimate

World Bank Group cuts global growth estimate

The World Bank Group has cuts its forecast for the global economy and now predicts it will grow by 3 per cent next year, revised down from the 3.5 per cent expectation published in June last year.

The group’s bi-annual global economic prospects report, published today (14 January), revealed that the global economy is “still struggling” to gain momentum.

After growing by an estimated 2.6 per cent in 2014, compared to a previously forecast 3.4 per cent, the global economy is projected to expand by 3 per cent this year, 3.3 per cent in 2016 and 3.2 per cent in 2017, the bank predicted.

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It stated that underneath the “fragile global recovery” lie “increasingly divergent trends with significant implications for global growth”.

Activity in the US and UK is gathering momentum as labor markets heal and monetary policy remains extremely accommodative, however recovery in Europe and Japan has been “sputtering”.

The oil price collapse will result in winners and losers, the report added. Yesterday, FTAdviser sister publication Investment Adviser reported that the price of a barrel of Brent crude oil has fallen by nearly 4 per cent to $45.60.

There are four risks to the outlook: persistently weak global trade; the possibility of financial market volatility as interest rates in major economies rise on varying timelines; the extent to which low oil prices strain balance sheets; and the risk of a prolonged period of stagnation or deflation in the eurozone or Japan.

Jim Yong Kim, World Bank Group president, said: “In this uncertain economic environment, developing countries need to judiciously deploy their resources to support social programs with a laser-like focus on the poor and undertake structural reforms that invest in people.

“It’s also critical for countries to remove any unnecessary roadblocks for private sector investment. The private sector is by far the greatest source of jobs and that can lift hundreds of millions of people out of poverty.”

donia.o’loughlin@ft.com