Global economy on track for worst decade since 1960s, World Bank warns
Containers at the Port of Ningbo-Zhoushan in China's eastern Zhejiang Province in May. (Hector Retamal/AFP/Getty Images via CNN Newsource)
Global economic growth is on track for its weakest decade since the 1960s, according to a new analysis by the World Bank, which cites U.S. President Donald Trump's trade war as a major factor weighing on economies worldwide.
The World Bank expects Trump's barrage of new tariffs on America's trading partners to whittle down global economic growth to its lowest level since the 2008 financial crisis when discounting worldwide recessions, according to a report released Tuesday.
While the Washington, D.C.-based institution does not expect another global recession due to the tariffs, it said in a press release that — should its projections for global growth come to pass this year and next — 'average global growth in the first seven years of the 2020s will be the slowest of any decade since the 1960s.'
In its report, the World Bank downgraded its expectation for global GDP growth this year to 2.3% from the 2.7% it had forecast in January. That's based on the assumption that tariffs worldwide will remain at their late-May levels.
That puts the world economy on course for its weakest pace of growth in 17 years, excluding two global recessions — the first in 2009, following the financial crisis; and the second in 2020, the first year of the coronavirus pandemic. Those years saw global economic growth contract by 1.3% and 2.9%, respectively, according to World Bank data.
'The sharp increase in tariffs and the ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world's economies,' the institution said in the report.
It added that the 'turmoil' unleashed by 'heightened trade tensions' had prompted it to cut its growth forecasts for almost 70% of economies worldwide — across all regions and income groups. The anticipated slowdown in developing economies will also be influenced by long-running trends such as ballooning government debt levels, the institution noted.
Fitch Ratings said Tuesday that it had downgraded its outlook for global government bonds this year from a 'neutral' status to 'deteriorating,' citing the impact of tariff hikes and trade policy uncertainty.
'The escalation in the global trade war, uncertainty over the endpoint for tariffs and their impact on global trade volumes, supply chains, investment and international relations is a significant adverse global economic shock,' the credit rating agency said in a report.
Since retaking office in January, Trump has hiked import duties on most of America's trading partners and on key goods, including cars and steel. A round of punishingly high 'reciprocal tariffs' is set to whack many of America's trading partners from July 9 unless they can strike a deal with Washington — and despite the levies hitting a legal stumbling block last month.
Fresh trade negotiations between the United States and China kicked off in London on Monday, and continued on Tuesday, with both sides attempting to preserve a fragile truce brokered last month.
Despite ongoing talks, the tariffs, their erratic implementation and the unpredictability that both have injected into the global economy, are weighing on many businesses and consumers.
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