Global Trade War to Depress Growth in Developing Economies, World Bank Warns

The escalating US-driven global trade war is expected to have a devastating impact on developing economies, with the World Bank predicting that growth in nearly two-thirds of these countries will slow down this year. The lender warned that the globalisation that led to an "economic miracle" in many countries has reversed, with emerging and developing countries projected to achieve 3.8 per cent growth this year, a 0.4 percentage point decline from last year. Per capita income growth in developing countries will be 2.9 per cent, also 1.1 percentage points below the average between 2000 and 2019.

Key Takeaways:

• The global trade war will depress growth in almost two-thirds of developing economies this year, according to World Bank forecasts.
• Emerging and developing countries will achieve 3.8 per cent growth this year, a 0.4 percentage point decline from last year.
• Per capita income growth in developing countries will be 2.9 per cent, 1.1 percentage points below the average between 2000 and 2019.
• Global trade growth in goods and services is set to slow sharply this year to 1.8 per cent.
• Compounding the pressures is a halving of foreign direct investment inflows into emerging and developing countries compared with the peak in 2008.
• The bank warned that "downside risks" to the outlook predominate, among them a further escalation of trade barriers, persistent policy uncertainty, and rising geopolitical tensions.
• The World Bank's chief economist, Indermit Gill, warned that developing countries are becoming "a development-free zone."
• The bank estimates that the per capita GDP of high-income countries will be roughly where it was expected to be before the Covid-19 pandemic, while developing countries will be 6 per cent worse off.

Sources:

• World Bank's latest economic outlook

Statistics:

• 3.8 per cent: projected growth in emerging and developing countries this year
• 4.2 per cent: growth last year
• 2.9 per cent: per capita income growth in developing countries this year
• 1.8 per cent: global trade growth in goods and services this year
• 3.4 per cent: global trade growth in goods and services previously
• 1 billion: the number of people lifted out of extreme poverty as a result of the transformation in developing countries over the past half-century
• 6 per cent: the estimated decline in per capita GDP of developing countries compared to the Covid-19 pandemic
• 20 years: the time it could take for economies to recoup the economic losses of the 2020s, excluding China.