Economic Analysis

World Economic Prospects

Risks and Development Challenges

Economic Analysis

3.1

3.0

2.7

2.9

3.7

3.6

3.3

3.6

2

2.5

3

3.5

4

2012 2013 2014 2015 2016 2017 2018e 2019f 2020f

2012 PPPs

2012 Market Exchange Rates

WESP 2019

WESP 2019

Growth of World Gross Product

Growth forecasts revised down

• Global growth projected to slow

from 3% in 2018 to 2.7% in

2019.

• Trade tensions have further

increased

• Country-specific factors in major

developed and emerging

economies

• Cyclical movements

• Policy uncertainty

• Weather-related shocks

WESP Mid-2019, y-o-y,%

Economic AnalysisEconomic Analysis

Global growth remains highly uneven

2019 GDP Growth Projections

Economic Analysis

• Further escalation of trade tensions

• Deterioration in financial conditions

• Sharp downturn in major economies

• Accelerating effects of climate change

• Lack of policy space or capacity to respond

Risks tilted to the downside

Risk factors are strongly interrelated

Economic Analysis

• World trade growth projected to

slow to 2.7% from 3.6% in 2018

• Bilateral US-China trade has

dropped 15% y-o-y in Jan-April ‘19

• Investment in trade-oriented

sectors is down

• Dampens medium-term prospects

for productivity

Global trade and IP have slowed sharply

-1

0

1

2

3

4

5

6

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Jan

-18

Jul-

18

Jan

-19

Global trade

World industrial production

y-o-y,%

Economic Analysis

Import demand stagnated in Q1 2019

-1

0

1

2

3

4

5

6

7

2014 2015 2016 2017 2018 H1 2018 H2 Jan - Mar 2019

United States Euro Area Other advanced economies

Emerging Asia Eastern Europe / CIS Latin America

Africa and Middle East

Ppt. Contribution

Economic Analysis

Sharper slowdown in major economies would impact developing regions

0

10

20

30

40

50

0

10

20

30

40

50

60

70

80

90

Me

xico

an

dC

entr

alA

me

rica

Cen

tral

Afr

ica

No

rth

Afr

ica

Sout

hA

me

rica

East

Asi

a

Car

ibb

ean

Sout

hern

Afr

ica

Wes

t A

fric

a

Sout

h A

sia

East

Afr

ica

Wes

tern

Asi

a

China (CN)

United States (US)

Euro Area (EA-19)

Combined exports to CN, US and EA-19 (right axis)

Share of total exports, % Share of total GDP, %

Economic Analysis

• Helped stabilize financial

markets and short-term capital

flows

• Impact on real sector activity

uncertain

• May fuel further debt

accumulation and raise

medium-term financial stability

risks

29 28

43

12

46

34 3230

0

10

20

30

40

50

2016 2017 2018 2019

Tightened

Eased

Number of central banks

Central banks have been easing monetary policy

Economic Analysis

Historically high debt levels pose financial stability risks

0

50

100

150

200

250

300

2007 2011 2018 2007 2011 2018 2007 2011 2018

Developed economies Emerging economiesexcluding China

China

Government

Corporates

Households

% of GDP • Sources of vulnerability differ:

• Euro area: sovereign debt,

banking sector

• US: higher-risk corporate sector

• EMs: corporate, dollar-

denominated debt

• LICs: increasing debt distress

• Interest payments as burden

• Limits policy space, weighs on

recovery

Economic Analysis

Weak economic performance exacerbates development challenges

-3

-2

-1

0

1

2

3

4

5

6

7

EastAsia

SouthAsia

WesternAsia

WestAfrica

EastAfrica

CentralAfrica

NorthAfrica

SouthernAfrica

LatinAmerica

andCaribbean

Economiesin

transition

1996-2016 2017 2018-2020 Developing country average 1996-2016

Average annual GDP per capita growth by region

y-o-y, %

Economic Analysis

Number of poor has risen in parts of Africa and Latin America between 2014 and 2018

Combination of factors:

• Commodity price shock

• Macroeconomic imbalances /

crisis

• Governance issues and

political crisis

• Armed conflict

Economic Analysis

Many economies will find it highly challenging to eradicate poverty by 2030

0

5

10

15

20

25

30

35

40

World Africa LDCs

2015 Level Baseline scenario 2030

Scenario 1: Faster income growth Scenario 2: Declining inequality

Scenario 3: Combined

Extreme poverty headcount ratios, scenarios for 2030

% of population

Economic Analysis

• Addressing short-term macroeconomic vulnerabilities

• Resolve trade tensions

• Tackle financial vulnerabilities

• Shift away from over-reliance on monetary policy

• Improve fiscal management

• Boosting medium-term inclusive growth:

• Improve natural resource management

• Channel available finance into productive investment

▪ resilient infrastructure; quality education; health

Policies to promote SDG progress

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