World Bank upgrades growth outlook on strengthening recovery | Business| Economy and finance news from a German perspective | DW | 10.01.2018
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World Bank upgrades growth outlook on strengthening recovery

The global lender has surprised analysts by predicting better-than-expected global growth. But the bank also warned of fading potential mainly in advanced economies due to aging populations.

According to the World Bank's Global Economic Prospects report released Tuesday, the global economy is expected to grow by 3.1 percent in 2018, after a better-than-expected performance in 2017 that boosted global gross domestic product (GDP) by three percent last year.

In its twice-yearly report, the bank noted that for the first time since the global financial crisis, all major regions of the world were experiencing an uptick in economic growth. "The current, broad-based growth acceleration is a welcome trend and could be self-reinforcing," it said.

The "highly synchronized" economic expansion across all regions includes solid growth in the big three advanced economies — the US, Japan and the EU — and improvements in the important emerging market economies. Moreover, large commodity exporting economies like Russia and Brazil are recovering amid rising prices for raw materials.

Aging populations seen as a risk

World Bank economist Ayhan Kose told the news agency AFP that the ultra-lose monetary policies pursued by the world's major central banks had helped stabilize the global economy and fueled the recovery.

But Kose — who heads the bank's Development Prospects Group — warned that "downside risks continue dominating the outlook." Those included rising debt levels, which were more concerning given that central banks are beginning to raise interest rates and could do so more quickly if the recovery started to ignite inflation, he said. Another risk was "escalating trade restrictions," he added.

Read more: OECD: Investment needed to sustain global growth

In its report, the World Bank also cited headwinds from aging populations in both advanced and developing economies, expecting decreased labor supply and productivity growth. "More than 84 percent of global GDP is currently produced by countries whose working age population shares are expected to shrink by 2030," it stated.

In order to increase potential growth and offset the impact of aging populations, the World Bank is calling on all countries to increase investment in infrastructure and their workforces, stressing that the cost of neglecting these priorities would be "sky-high."

"Policies that raise the quality of education and training; further improve female, youth, and senior labor market attachment; and match changing labor market needs would be particularly beneficial," the report urged.

In addition, investment needs could be filled through "high-quality public infrastructure, better regulation, and well-designed research and development incentives."

uhe/aos (Reuters, AFP, dpa)

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