Investor Presentaiton
ANNUA
2018-2019
ANNUAL
REPORT
2018-2019
which is intensive in machinery and consumer
durables, remains sluggish. The downgrades to the
growth forecast for China and emerging Asia are
broadly consistent with the simulated impact of
intensifying trade tensions and associated confidence
effects.
For advanced economies, growth is projected at 1.9
percent in 2019. In the United States, 2019 growth is
expected to be 2.6 percent which reflects stronger-
than anticipated economic performance on the
back of robust exports and inventory accumulation,
domestic demand was somewhat softer than
expected and imports weaker as well, in part
reflecting the effect of tariffs. Growth in the euro area
is projected at 1.3 percent in 2019. The forecast is
revised down slightly for Germany but it is unchanged
for France and Italy. The United Kingdom is set to
expand at 1.3 percent in 2019. The forecast assumes
an orderly Brexit followed by a gradual transition to
the new regime. However, as of mid-July, the ultimate
form of Brexit remained highly uncertain.
Euro area growth is expected to pick up over the
remainder of this year and into 2020, as external
demand is projected to recover. While Japan's
economy is set to grow by 0.9 percent in 2019.
Emerging and developing Asia is expected to grow at
6.2 percent in 2019-20. In China, the negative effects
of escalating tariffs and weakening external demand
have added pressure to an economy already in the
midst of a structural slowdown and needed regulatory
strengthening to rein in high dependence on debt. With
policy stimulus expected to support activity in the face
of the adverse external shock. India's economy is set to
grow at 7.0 percent in 2019, picking up to 7.2 percent
in 2020.
Growth in the Middle East, North Africa, Afghanistan,
and Pakistan region is expected to be 1.0 percent in
2019. These forecasts are largely influenced by the
crippling effect of tighter US sanctions on Iran. Civil
strife across other economies, including Syria and
Yemen, add to the difficult outlook for the region.
Partially offsetting these developments are improved
prospects for Saudi Arabia's economy-the non-oil
sector is expected to strengthen in 2019 with higher
government spending and improved confidence, and
in 2020 with an increase in oil sector growth. Activity in
the Commonwealth of Independent States is projected
to grow at 1.9 percent in 2019 which mostly relects
Russia's economic outlook in the overall.
Global trade: global industrial activity and goods trade have lost considerable momentum in
2019. Goods trade growth and new export orders fell to levels comparable to those prevailing
at the start of 2016. The deceleration was broad-based. Trade in Asia-which contains major,
tightly interconnected, global manufacturing hubs-was particularly affected, although recent
indicators suggest some stabilization. In all, global trade growth is projected to weaken from
4.1 percent in 2018 to 2.6 percent this year slightly below the pace observed during the
2015-16 trade slowdown, and the weakest since the global financial crisis.
Financial markets: amid signs of deterioration in global economic prospects and
persistently low inflation, major central banks have adopted more accommodative
monetary policy stances for the near term. The U.S. Federal Reserve has placed its
tightening cycle on hold, while the European Central Bank has delayed the end of
its negative interest rate policy and implemented new measures to stimulate credit
and activity. Shifting market expectations about monetary policies contributed to a
drop in long-term yields-to their lowest levels since mid-2017 in the United States,
and to below zero in Germany for the first time since late 2016. Notwithstanding
recent reversals related to trade policy uncertainty, equity market valuations have
risen, and aggregate EMDE sovereign bond spreads have dropped about 50
basis points since the start of 2019. International debt issuance has been robust
this year, as many borrowers have taken advantage of more favorable market
conditions to meet growing refinancing. Global financing conditions are expected
to remain supportive in the near term and tighten only gradually later in the
forecast period. This assumes that monetary policy accommodation in major
advanced economies will be gradually removed, but at a slower pace than
previously expected.
Commodity markets: prices of most industrial commodities picked up in the
first half of 2019, but remained well below peak values from last year, while
agricultural prices were mostly flat. Supply constraints and production cuts
have supported prices since the start of the year; however, heightened
trade tensions have recently weighed on prices of some commodities,
particularly metals. Price forecasts for the year as a whole have been
downgraded due to weaker-than-expected global growth.
Crude oil prices recovered over the first half of the year, averaging $64
per barrel (bbl), supported by production cuts among OPEC and its
non-OPEC partners. More recently, however, the re- escalation of
trade tensions have contributed to declining prices for most base
metals. Overall, metals prices are expected to decline slightly
in 2019 and 2020, a downward revision relative to the January
forecast relecting a weaker outlook for global metals demand.
Agricultural prices were stable, on average, in the first half of
2019, amid high stock levels and favorable crop conditions for
the fourth consecutive year.
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