WASHINGTON – The world economy will pick up speed this year and next, helped by steadier commodity prices and a pickup in global trade, the World Bank said Sunday.
The anti-poverty agency predicts 2.7 percent growth this year and 2.9 percent in 2018, improving on 2016's 2.4 percent expansion.
The bank sees the U.S. economy growing 2.1 percent this year, up from 1.6 percent in 2016, and the 19-country eurozone expanding 1.7 percent, down a notch from 1.8 percent. Japan is expected to grow 1.5 percent, fastest pace since 2013 and up from 1 percent last year. China's deceleration will continue — from 6.7 percent growth last year to 6.5 percent in 2017 to 6.3 percent in 2018 — as the country moves away from unsustainable growth fueled by often-wasteful investment and toward slower, steadier growth based on consumer spending.
The bank's outlook for global growth was unchanged from a forecast it published January — a surprising bit of good news: In the sluggish aftermath of the 2007-2009 Great Recession, the bank repeatedly had to downgrade its original forecasts as hoped-for improvements never arrived.
But the environment worldwide is looking sunnier. Commodity prices are bouncing back from a freefall that began in 2014, taking down two years of growth. The bank sees oil prices rising 24 percent and non-energy commodity prices climbing 4 percent this year.
World trade is expected to grow 4 percent in 2017, the fastest in three years.
Still, the bank calls the recovery "fragile" and warns of risks from protectionism, geopolitical conflict and possibly financial fallout from expected interest-rate increases in the United States.
The world economy also faces long-term challenges, including a productivity slump that vexes economists and constrains improvements in living standards. World Bank economist Ayhan Kose, who directed the forecast, says countries should take advantage of relatively good times to enact reforms that might improve productivity, such as eliminating unnecessary regulations and promoting more competition between businesses.
"This is a good time to undertake the types of policies that will make these economies more resilient," he says. "Fix your roof when the sun is shining."