According to the latest World Bank (WB) forecast, the global economy is projected to grow by 2.9% in 2016. This is lower than the earlier forecast of 3.3% made in June 2015. WB has observed that simultaneous slowing of four of the largest emerging markets – Brazil, Russia, China, and South Africa – poses the risk of spillover effects for the rest of the world economy.
The growth forecast for China – the world’s second largest economy – has been cut from 7.0% to 6.7%, which would mark its weakest performance since 1990. The Brazilian economy is projected to contract by 2.5% (earlier projection of growth by 1.1%) while the Russian economy would contract by 0.7% (earlier projection of growth by 0.7%). According to the forecast, the South African economy should grow at a modest 1.4% (down from earlier forecast of 2.1%).
Among the BRICS nations, only India is sowing a silver lining with the economy projected to grow at a healthy 7.8%. However, this is lower than 7.9% forecast in June last. WB has also cut its outlook for the United States and other developed economies. The US economy is projected to grow by 2.7%, the Euro zone by 1.7% and Japanese economy by 1.3%.
The New Year has dawned with the meltdown in Chinese stock markets. The CSI 300 index has fallen by 12% so far. The newly-introduced circuit breakers have tripped on January 4 and 7, 2016 causing trading to be halted. The tremors are being felt around the world, creating further uncertainty. In this situation, the outlook remains grim.