But economic activity should still pick up modestly to a 2.9 percent pace, from 2.4 percent growth in 2015, as advanced economies gain speed, said the World Bank’s January 2016 Global Economic Prospects released here.
India, the dominant economy in the South Asian region, is projected to grow at a faster 7.8 percent in fiscal 2016-17 with growth in the region speeding up to 7.3 percent in 2016 from 7 percent in the year just ended.
The region is a net importer of oil and will benefit from lower global energy prices. At the same time, because of relatively low global integration, the region is shielded from growth fluctuations in other economies, the report said.
Simultaneous weakness in most major emerging markets is a concern for achieving the goals of poverty reduction and shared prosperity because those countries have been powerful contributors to global growth for the past decade, the bank said.
Spillovers from major emerging markets will constrain growth in developing countries and pose a threat to hard-won gains in raising people out of poverty, the report warned.
Global economic growth was less than expected in 2015, when falling commodity prices, flagging trade and capital flows, and episodes of financial volatility sapped economic activity.
Firmer growth ahead will depend on continued momentum in high income countries, the stabilisation of commodity prices, and China’s gradual transition towards a more consumption and services-based growth model.
Developing economies are forecast to expand by 4.8 percent in 2016, less than expected earlier but up from a post-crisis low of 4.3 percent in the year just ended.
Growth is projected to slow further in China, while Russia and Brazil are expected to remain in recession in 2016.
“There is greater divergence in performance among emerging economies. Compared to six months ago, risks have increased, particularly those ssociated with the possibility of a disorderly slowdown in a major emerging economy,” said World Bank Group Vice President and Chief Economist Kaushik Basu.
“A combination of fiscal and central bank policies can be helpful in mitigating these risks and supporting growth.”
Although unlikely, a faster-than-expected slowdown in large emerging economies could have global repercussions, the report said.
Risks to the outlook also include financial stress around the US Federal Reserve tightening cycle and heightened geopolitical tensions, it said.