World Bank on Tuesday said in its latest report that the global economy is expected to see moderate recovery in the coming years, with growth rate in 2017 and 2018 separately at 2.7 percent and 2.9 percent.
The growth rate in 2017 was faster than estimated 2.3 percent growth in 2016, but 0.1 percentage point lower than its forecast made in June 2016, said the World Bank in its latest flagship Global Economic Prospects report.
The Washington-based lender attributed the slight acceleration in growth to the improvements in emerging market and developing economies, as they are expected to see receding headwinds, especially the strengthened commodity prices.
It expected the emerging market and developing economies to grow 4.2 percent in 2017 and 4.6 percent in 2018, a pickup from 3.4 percent in 2016.
These economies are forecast to contribute 1.6 percentage points to global growth in 2017, accounting for about 60 percent of global growth for the first time since 2013.
The World Bank kept its forecast for China's economic growth unchanged, with the growth for 2017 at 6.5 percent and for 2018 at 6.3 percent. Chinese economy will continue sustainable growth as it is rebalancing from manufacturing to services, despite the reemerging concerns for property markets, said the bank.
In contrast to the relatively buoyant growth seen in the emerging market economies, the advanced economies will continue modest growth in the coming years.
"Advanced economies continue to be afflicted by weak underlying growth and low inflation, while uncertainty about future policy direction increased," said the World Bank. It forecast the advanced economies to grow 1.8 percent both in 2017 and 2018, slightly up from 1.6 percent in 2016.
The U.S. economy is expected to grow 2.2 percent in 2017 and 2.1 percent in 2018. But the bank added that U.S. policies will likely undergo changes under the new U.S. administration, which could have significant implications for both the U.S. and global economy.
According to the Bank's estimation, if the new administration's tax cut proposals are fully implemented, these measures could raise U.S. GDP growth forecasts to 2.2-2.5 percent in 2017 and 2.5-2.9 percent in 2018, without consideration of additional policy changes by the new administration.
However, it also warned that heightened uncertainty about potential policy initiatives could set back already-weak global investment.
"There is substantial uncertainty around baseline projections for global growth, where downside risks still dominate," said the World Bank. Policy uncertainty has been heightened following the electoral outcomes in the U.S. and U.K., it said.
Policy uncertainty, together with financial market disruptions amid tighter global financing conditions, may be amplified over the medium term by mounting protectionist tendencies, slower potential growth and lingering vulnerabilities in some emerging market economies, said the bank.
It called on advanced economies to introduce more supportive fiscal policies, and suggested emerging markets to find an appropriate balance between fiscal adjustment, measures to reduce vulnerabilities, and growth-oriented reforms.
