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World Economic Situation and Prospects

World Economic Situation and Prospects as of mid-2016

World Economic Situation and Prospects 2016

Weak global growth continues to linger, posing a challenge to the implementation of the 2030 Agenda for Sustainable Development. World gross product is projected to expand by just 2.4 per cent in 2016, the same weak rate as in 2015. This reflects significant downward revisions of growth for many countries in Africa, the Commonwealth of Independent States (CIS), and Latin America and the Caribbean from the forecasts in December 2015. Persistent weakness in aggregate demand in developed economies remains a drag on global growth, while low commodity prices, mounting fiscal and current-account imbalances and policy tightening have further dampened the growth prospects of many commodity-exporting economies. The already bleak growth prospects have been compounded by severe weather-related shocks, political challenges and large capital outflows in many developing regions.

Downside risks to the global economy remain elevated against the backdrop of weak demand, low investment, low commodity prices and the financial market turbulences. Divergent global inflationary pressures have prompted procyclical monetary tightening in several developing economies, in contrast to additional monetary easing in the euro area and Japan, and delays in interest-rate rises by the United States Federal Reserve. Increased divergence in global interest rates may intensify capital flow volatility and exchange-rate pressures in developing economies. Greater policy coordination among countries can mitigate the negative spillover effects of policy misalignment and contain financial market volatility. There is also a growing need for reducing high dependency on monetary policy by exploiting available fiscal space and other policy measures to boost global growth.