In the latest update of its Global Economic Prospects report, the bank slashed the growth forecast for the UAE to 2 per cent this year, a drop of 1.1 percentage point from the January 2016 projections.
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In one of the gloomiest predictions by an worldwide forecaster, the bank said the effect of the collapse in oil income on developing countries would restrict global growth to 2.4% this year, well down on its January forecast of 2.9%.
Bank officials attribute about half the downward revision to emerging markets and developing economies that depend heavily on exports of oil and other commodities whose prices have plummeted. Growth in these economies is projected to advance at a meager 0.4 percent pace this year, a downward revision of 1.2 percentage points from the January outlook, it said.
As a group, those developing and emerging economies that are dependent on commodity exports are now forecast to grow at a pace of 0.4% in 2016, down from 1.6% in the January outlook.
The World Bank, meanwhile, is projecting growth in the East Asia and Pacific region, which includes China, to slow to an unrevised 6.3% rate in 2016.
Notably, the World Bank left its forecast for China’s economic growth unchanged at 6.7 percent.
Weak economies, low commodity prices and depressed global trade have all contributed to the downgrade.
Among emerging market and developing economies softer commodity prices have been accompanied by heightened political uncertainties, concerns about the effectiveness of monetary policy stimulus in some advanced economies and policy makers’ ability or willingness to use expansionary fiscal policy if needed. Tokyo’s Nikkei 225 gained 0.9 percent to 16,830.92 and Seoul’s Kospi advanced 0.8 percent to 2,027.08. It now expects growth in these countries will reach 5.8 per cent, down a tenth of a percentage point from the January forecasts.
“The country benefits from diversified export markets and low global commodity prices”, World Bank said. It said risks to growth have risen since the beginning of the year, particularly the high level of borrowing by companies in developing countries, which has left them vulnerable to credit crises as growth stagnates.
“Divergences between commodity exporters and importers persist”.
Despite the lower growth forecast, the UAE is still expected to fare better compared to its peers in the region.
Domestic demand is fueling growth in the Euro area, while the economic recovery in the United States remains firm on the back of resilient private consumption.
India, the region’s largest economy, showed strengthening activity, as did Pakistan, Bangladesh and Bhutan, according to the WB forecast release on Tuesday.
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In Q1, 2016 compared with Q1, 2015, Romania and Sweden recorded the highest economic growth rates in the European Union, of 4.2 percent, followed by Slovakia (3.7 percent) and Spain (3.4 percent).
