World Bank Sees Things Gloomier

The World Bank is part of the United Nations. It is a group of five institutions and has the overarching goal of ending extreme poverty and boosting shared prosperity. As part of its activities, the Bank generates bi-annual projections for regional and global growth prospects.

In its most recent forecast, the World Bank has downgraded its estimate from global growth in 2015 from 3.4% made in June to 3%. Similarly, its projection for 2016 has been trimmed from 3.5% back to 3.3%, the summary report did not give the specific grounds for the more modest growth projection, but it is likely a consequence of the weak global demand seen for much of 2014.

Kaushik Basu, World Bank Chief Economist and Senior Vice President noted: Worryingly, the stalled recovery in some high-income economies and even some middle-income countries may be a symptom of deeper structural malaise. As population growth has slowed in many countries, the pool of younger workers is smaller, putting strains on productivity. But there are some silver linings behind the clouds. The lower oil price, which is expected to persist through 2015, is lowering inflation worldwide and is likely to delay interest rate hikes in rich countries. This creates a window of opportunity for oil-importing countries, such as China and India; we expect India’s growth to rise to 7 percent by 2016. What is critical is for nations to use this window to usher in fiscal and structural reforms, which can boost long-run growth and inclusive development.”  Perhaps he had not noted that unemployment within the Eurozone, UK and USA, to name but three, seems to be disproportionately high amongst younger workers (school leaver to 25).

The continuingly shrinking oil price is being blamed for tumbling stock indices around the world. Whilst stocks related to energy production ought to be under pressure, cheaper transport and energy costs should be good news for most companies. Also, whilst the declining oil price is likely to trigger prolonged deflation in the Eurozone, it is not, of itself, a good reason for the ECB to push ahead with quantitative easing measures which some analysts have been predicting. Energy and transport costs can be broken out from the inflation figures such that a general trend can be seen and that would be the intelligent basis for the ECB to base its thinking on.