In a move that has surprised many analysts, the World Bank has predicted that the global economy will grow 3.1 % in 2018 – the highest prediction in the last seven years. This comes after 2017 produced a better-than-expected growth, which boosted global GDP by 3 %.
Drivers behind the expected growth
The World Bank noted that all the major regions in the world were experiencing positive economic growth. This, too, has happended for first time since the 2008 financial crisis. The US, Japan and EU are witnessing economic expansion, while emerging market economies are also making huge economic strides. Russia and Brazil, which are large commodity exporters are showing positive signs of recovery, even though the prices of raw materials continue to rise. Other factors driving the growth include stronger investments, an increase in trade flows and increased manufacturing activities.
Risks that could derail the expected growth
While all signs pointing to a positive growth projection, the world's lending organisation is cautioning world economies about some real risks: One of the major risks concerns the banking sector. Most banks in the world have kept their interest rates low over the years, which has encouraged borrowing and investment. The world bank is cautioning them against increasing their interest rates as this would have a negative impact on growth. The World Bank is also cautioning against trade policies geared towards protectionism, which could cause an imbalance in trade among countries. They have also warned policy makers against complacency, and urged them to increase investments in areas such as infrastructure, workforce and education. This will help in enhancing productivity and maintaining economic growth.