The January 2019 edition, Darkening Skies, highlights how precarious the current economic juncture is. In a nutshell, growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased. As the report points out, EMDEs face some of the greatest risks. If a trade war between the United States and China contributes to a global slowdown, the spillover effects on EMDEs could be profound. Similarly, a sharp increase in global interest rates would severely affect highly indebted EMDEs, as Turkey and Argentina painfully discovered last summer. Since the global outlook depends heavily on advanced economies, the GEP also flags the implications of advancedeconomy policies
A World Bank Group Flagship Report JANUARY 2019 Global Economic Prospects Darkening Skies JANUARY 2019 © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 22 21 20 19 This work is a product of the staff of The World Bank with external contributions The findings, interpretations, and conclusions expressed in this work not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent The World Bank does not guarantee the accuracy of the data included in this work The boundaries, colors, denominations, and other information shown on any map in this work not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries Nothing herein shall constitute or be considered to be a limitation upon or waiver of the 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addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org ISSN: 1014-8906 ISBN (paper): 978-1-4648-1343-6 ISBN (electronic): 978-1-4648-1386-3 DOI: 10.1596/978-1-4648-1343-6 Cover design: Bill Pragluski (Critical Stages) The cutoff date for the data used in this report was December 19, 2018 Summary of Contents Chapter Global Outlook: Darkening Skies Chapter Regional Outlooks 55 Chapter Growing in the Shadow: Challenges of Informality 127 Chapter Two Topical Essays 197 Debt in Low-Income Countries: Evolution, Implications, and Remedies 199 Poverty Impact of Food Price Shocks and Policies 209 Boxes Box 1.1 The great disinflation Box 1.2 Low-income countries: Recent developments and outlook 22 Box 1.3 Regional perspectives: Recent developments and outlook 26 Box 2.1.1 Informality in East Asia and Pacific 63 Box 2.2.1 Informality in Europe and Central Asia 75 Box 2.3.1 Informality in Latin America and the Caribbean 85 Box 2.4.1 Informality in the Middle East and North Africa 95 Box 2.5.1 Informality in South Asia 104 Box 2.6.1 Informality in Sub-Saharan Africa 113 Box 3.1 Linkages between formal and informal sectors 132 Box 3.2 Regional dimensions of informality: An overview 140 Box 3.3 Casting a shadow: Productivity in formal and informal firms 146 Box 3.4 Under the magnifying glass: How policies affect informality? 155 III Table of Contents Foreword xiii Acknowledgments xv Executive Summary xvii Abbreviations xix Chapter Global Outlook: Darkening Skies Summary Major economies: Recent developments and outlook United States Euro Area 13 Japan 13 China 14 Global trends 15 Global trade 15 Financial markets 17 Commodities 18 Emerging market and developing economies: Recent developments and outlook 19 Recent developments 20 EMDE outlook 28 Risks to the outlook 30 Disorderly financial market developments 31 Escalating trade restrictions 32 Policy uncertainty and geopolitical tensions 33 Region-specific downside risks 35 Simultaneous slowdown in the two largest economies 35 Possible productivity revival 37 Policy challenges 37 Challenges in advanced economies 37 Challenges in emerging market and developing economies 39 Box 1.1 The great disinflation .8 Box 1.2 Low-income countries: Recent developments and outlook 22 Box 1.3 Regional perspectives: Recent developments and outlook 26 References 47 V Chapter Regional Outlooks 55 East Asia and Pacific 57 Recent developments 57 Outlook 59 Risks 61 Box 2.1.1 Informality in East Asia and Pacific 63 Europe and Central Asia 69 Recent developments 69 Outlook 70 Risks 71 Box 2.2.1 Informality in Europe and Central Asia 75 Latin America and the Caribbean 79 Recent developments 79 Outlook 80 Risks 82 Box 2.3.1 Informality in Latin America and the Caribbean 85 Middle East and North Africa 89 Recent developments 89 Outlook 90 Risks 91 Box 2.4.1 Informality in the Middle East and North Africa 95 South Asia 99 Recent developments 99 Outlook 100 Risks 102 Box 2.5.1 Informality in South Asia 104 Sub-Saharan Africa 107 Recent developments 107 Outlook 109 Risks 110 Box 2.6.1 Informality in Sub-Saharan Africa 113 References 118 VI Chapter Growing in the Shadow: Challenges of Informality 127 Introduction 129 Informality: Conceptual considerations and measurement 136 Main features of the informal economy 137 Causes and implications of informality 143 Correlates of informality 144 Informality, poverty, and income inequality 152 Worker earnings differentials 152 Aggregate income inequality and poverty 154 Informality and fiscal outcomes 158 Policy options 158 Fiscal policy measures 159 Business climate and governance measures 160 From a comprehensive strategy to implementation 162 Emerging policy opportunities and challenges 162 Annex 3.1 Measures of informality 163 Annex 3.2 Characteristics of informal-economy business cycles 167 Annex 3.3 Informality and earnings inequality: A meta-analysis approach 167 Annex 3.4 Pre-existing informality and changes in poverty and income inequality 169 Annex 3.5 Labor legislation and informality 169 References 184 Box 3.1 Linkages between formal and informal sectors 132 Box 3.2 Regional dimensions of informality: An overview 140 Box 3.3 Casting a shadow: Productivity in formal and informal firms 146 Box 3.4 Under the magnifying glass: How policies affect informality 155 Chapter Two Topical Essays 197 Debt in Low-Income Countries: Evolution, Implications, and Remedies 199 Introduction 199 Key characteristics of the recent rise in LIC debt 199 Other LIC vulnerabilities 202 Role of better debt management 204 Complementary policy measures 206 Conclusion 207 Annex 4.1 Comparison of LIDCs and LICs 208 VII Poverty Impact of Food Price Shocks and Policies 209 Introduction 209 Food price shocks and their effects 211 Government interventions during food price shocks .214 Poverty impact of the 2010-11 food price shock 217 Conclusions .220 Annex 4.2 Methodology 221 References 224 Statistical Appendix 229 Selected Topics 236 Figures VIII 1.1 Summary - Global prospects 1.2 Global risks and policy challenges 1.3 Advanced economies 1.1.1 Global inflation 1.1.2 Disinflation and factors associated with disinflation 10 1.1.3 Inflation synchronization 12 1.1.4 Low inflation episodes 12 1.4 United States 13 1.5 Euro Area 14 1.6 Japan 14 1.7 China 15 1.8 Global trade 16 1.9 Global finance 17 1.10 Commodity markets 18 1.11 Activity in EMDEs 20 1.2.1 Recent developments in low-income countries 23 1.2.2 Outlook 24 1.3.1 Regional growth 27 1.12 EMDE growth prospects 28 1.13 Poverty and per capita income growth 29 1.14 Risks: Tilted to the downside 30 1.15 Financial stress 32 1.16 Trade protectionism 33 STATISTICAL APPENDIX S T A TI S T I C A L A P P E N D IX G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 231 Real GDP growth Annual estimates and forecasts1 2016 2017 World 2.4 3.1 3.0 Advanced economies 1.7 2.3 United States 1.6 Euro Area 1.9 Japan United Kingdom Emerging market and developing economies East Asia and Pacific 2018e 2019f Quarterly growth2 2020f 2021f 17Q2 17Q3 17Q4 2.9 2.8 2.8 2.9 3.2 3.2 18Q1 18Q2 18Q3e 3.0 3.2 2.9 2.2 2.0 1.6 1.5 2.1 2.5 2.4 2.2 2.4 2.0 2.2 2.9 2.5 1.7 1.6 2.1 2.3 2.5 2.6 2.9 3.0 2.4 1.9 1.6 1.5 1.3 2.5 2.8 2.7 2.4 2.2 1.6 0.6 1.9 0.8 0.9 0.7 0.6 1.8 2.1 2.4 1.2 1.4 0.0 1.8 1.7 1.3 1.4 1.7 1.8 1.9 2.0 1.6 1.3 1.4 1.5 3.7 4.3 4.2 4.2 4.5 4.6 4.4 4.7 4.7 4.7 4.8 4.5 6.3 6.6 6.3 6.0 6.0 5.8 6.6 6.6 6.5 6.6 6.4 6.2 Cambodia 6.9 7.0 7.1 6.8 6.8 6.7 China 6.7 6.9 6.5 6.2 6.2 6.0 6.9 6.8 6.8 6.8 6.7 6.5 Fiji 0.4 3.8 3.5 3.4 3.3 3.3 Indonesia 5.0 5.1 5.2 5.2 5.3 5.3 5.0 5.1 5.2 5.1 5.3 5.2 Lao PDR 7.0 6.9 6.5 6.6 6.7 6.6 Malaysia 4.2 5.9 4.7 4.7 4.6 4.6 5.8 6.2 5.9 5.4 4.5 4.4 Mongolia 1.4 5.4 5.9 6.6 6.3 6.2 6.2 5.3 6.3 6.3 6.1 6.6 Myanmar 5.9 6.8 6.2 6.5 6.6 6.8 Papua New Guinea 2.6 2.8 0.3 5.1 3.1 3.4 Philippines 6.9 6.7 6.4 6.5 6.6 6.6 6.6 7.2 6.5 6.6 6.2 6.1 Solomon Islands 3.5 3.5 3.4 2.9 2.8 2.7 Thailand 3.3 3.9 4.1 3.8 3.9 3.9 3.9 4.3 4.0 4.9 4.6 3.3 Timor-Leste 5.3 -4.7 0.8 3.3 4.9 5.0 Vietnam 6.2 6.8 6.8 6.6 6.5 6.5 6.2 7.5 7.7 7.4 6.7 6.9 1.7 4.0 3.1 2.3 2.7 2.9 3.3 3.5 2.5 2.7 3.1 3.0 Albania 3.4 3.8 4.0 3.6 3.5 3.5 4.2 3.6 3.6 4.5 4.3 Armenia 0.2 7.5 5.3 4.3 4.6 4.6 Azerbaijan -3.1 0.1 1.1 3.6 3.3 2.7 Belarus -2.5 2.4 3.4 2.7 2.5 2.5 1.7 3.0 4.3 5.2 4.0 Bosnia and Herzegovina7 3.1 3.0 3.2 3.4 3.9 4.0 3.2 2.8 3.3 2.0 3.4 Bulgaria 3.9 3.8 3.3 3.1 3.0 2.8 3.8 4.3 3.3 3.5 3.2 2.7 Croatia 3.5 2.9 2.7 2.8 2.8 2.6 3.2 3.4 2.2 2.5 2.9 2.8 Georgia 2.8 4.8 5.3 5.0 5.0 5.0 4.8 4.0 5.3 5.2 5.6 3.7 Hungary 2.3 4.1 4.6 3.2 2.8 2.4 3.5 4.1 4.5 4.5 4.9 4.9 Kazakhstan 1.1 4.1 3.8 3.5 3.2 3.2 5.3 4.2 3.1 4.1 4.3 Kosovo 4.1 4.2 4.2 4.5 4.5 4.5 Kyrgyz Republic 4.3 4.6 3.1 3.4 3.9 4.0 Macedonia, FYR 2.8 0.2 2.5 2.9 3.2 3.3 -1.8 0.1 1.6 0.9 3.0 3.0 Moldova 4.5 4.5 4.8 3.8 3.5 3.2 Montenegro5 2.9 4.7 3.8 2.8 2.5 2.5 5.0 4.8 3.9 4.5 4.9 Poland 3.1 4.8 5.0 4.0 3.6 3.3 4.4 5.4 4.5 5.1 5.1 5.1 Romania 4.8 6.9 4.1 3.5 3.1 2.8 6.1 8.8 6.7 4.0 4.1 4.3 Russia -0.2 1.5 1.6 1.5 1.8 1.8 2.5 2.2 0.9 1.3 1.9 1.5 Serbia 2.8 1.9 3.5 3.5 4.0 4.0 1.8 2.2 2.5 4.8 4.9 3.8 Tajikistan 6.9 7.1 6.0 6.0 6.0 6.0 Turkey 3.2 7.4 3.5 1.6 3.0 4.2 5.3 11.5 7.3 7.2 5.3 1.6 Turkmenistan 6.2 6.5 6.2 5.6 5.1 4.9 Ukraine 2.3 2.5 3.5 2.9 3.4 3.8 2.6 2.5 2.3 3.1 3.8 2.8 Uzbekistan 7.8 5.3 5.0 5.1 5.5 6.0 Europe and Central Asia 232 S T A TI S T I C A L A P P E N D IX G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 Real GDP growth (continued) Annual estimates and forecasts1 Quarterly growth2 2016 2017 2018e 2019f 2020f 2021f 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3e -1.5 0.8 0.6 1.7 2.4 2.5 1.5 1.9 2.3 1.9 1.6 1.6 Argentina -1.8 2.9 -2.8 -1.7 2.7 3.1 3.0 3.8 3.9 3.9 -4.0 -3.5 Belize -0.5 1.2 1.5 1.9 1.7 1.7 Bolivia 4.3 4.2 4.5 4.3 3.8 3.4 3.8 4.3 5.2 4.4 4.4 Brazil -3.3 1.1 1.2 2.2 2.4 2.4 0.6 1.4 2.2 1.2 0.9 1.3 Chile 1.3 1.5 3.9 3.5 3.3 3.2 0.5 2.5 3.3 4.5 5.4 2.8 Colombia 2.0 1.8 2.7 3.3 3.7 3.6 1.7 1.7 1.8 2.2 2.8 2.7 Costa Rica 4.2 3.3 2.7 2.7 2.8 3.0 3.7 2.7 3.0 2.8 3.6 Dominican Republic 6.6 4.6 5.8 5.1 5.0 4.8 3.1 3.1 6.5 6.4 7.1 -1.2 2.4 1.0 0.7 0.7 1.2 2.1 2.9 2.8 1.6 0.9 El Salvador 2.6 2.3 2.8 2.5 2.4 2.4 0.3 3.2 2.5 2.7 2.9 Grenada 3.7 5.1 5.2 4.2 2.8 2.8 Guatemala 3.1 2.8 2.7 2.9 3.0 3.1 2.2 2.7 2.9 2.0 3.3 Guyana 2.6 2.1 3.4 4.6 30.0 24.8 Haiti 1.5 1.2 1.6 2.3 2.4 2.5 Honduras 3.8 4.8 3.6 3.8 3.8 3.7 3.5 5.9 4.2 3.0 4.0 Jamaica 1.4 1.0 1.7 1.8 2.0 2.0 0.1 1.0 1.2 1.4 2.2 Mexico 2.9 2.1 2.1 2.0 2.4 2.4 1.9 1.5 1.5 1.2 2.6 2.5 Nicaragua 4.7 4.9 -3.8 -0.5 2.6 3.6 4.1 3.2 4.7 2.5 -4.4 Panama 5.0 5.3 4.0 6.0 5.4 5.2 5.1 5.2 4.4 4.0 3.1 3.6 Paraguay 4.3 5.0 4.0 3.9 4.0 4.0 2.8 5.8 5.4 4.7 6.2 Peru 4.0 2.5 3.9 3.8 3.8 3.7 2.5 2.9 2.4 3.2 5.5 2.3 St Lucia 3.4 3.8 1.5 2.7 2.8 2.3 Latin America and the Caribbean Ecuador 1.3 0.5 1.2 1.6 1.6 2.0 Suriname -5.6 1.7 1.4 1.6 1.8 1.9 Trinidad and Tobago -6.1 -2.6 1.0 0.9 1.2 1.2 1.7 2.7 2.1 2.1 2.3 2.5 2.8 1.9 2.0 2.2 2.6 2.1 -16.5 -14.5 -18.0 -8.0 -5.0 -4.0 5.1 1.2 1.7 1.9 2.7 2.7 1.3 2.3 1.1 2.3 2.6 2.6 Algeria 3.2 1.4 2.5 2.3 1.8 1.8 Bahrain 3.2 3.9 3.2 2.6 2.8 2.8 Djibouti 8.6 5.7 6.7 7.3 7.5 7.5 Egypt 4.3 4.2 5.3 5.6 5.8 6.0 5.0 5.2 5.3 5.4 5.4 St Vincent and the Grenadines Uruguay Venezuela Middle East and North Africa Iran 13.4 3.8 -1.5 -3.6 1.1 1.1 3.5 6.1 2.4 2.9 2.5 Iraq 13.0 -2.1 1.9 6.2 2.9 2.8 Jordan 2.0 2.0 2.1 2.3 2.4 2.7 Kuwait 2.9 -3.5 1.7 3.6 3.6 3.6 -2.9 -3.6 -2.7 -0.5 1.9 Lebanon 1.7 1.5 1.0 1.3 1.5 1.5 Morocco 1.1 4.1 3.2 2.9 3.5 3.5 Oman 5.0 -0.9 1.9 3.4 2.8 2.8 Qatar 2.1 1.6 2.3 2.7 3.0 3.0 0.8 0.7 3.3 2.0 2.5 Saudi Arabia 1.7 -0.9 2.0 2.1 2.2 2.2 -0.8 -0.3 -1.4 1.2 1.6 Tunisia 1.1 2.0 2.6 2.9 3.4 3.6 1.8 2.1 2.0 2.3 2.9 2.6 United Arab Emirates 3.0 0.8 2.0 3.0 3.2 3.2 West Bank and Gaza 4.7 3.1 1.7 1.9 1.9 1.9 S T A TI S T I C A L A P P E N D IX G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 233 Real GDP growth (continued) Annual estimates and forecasts1 Quarterly growth2 2016 2017 2018e 2019f 2020f 2021f 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3e 7.5 6.2 6.9 7.1 7.1 7.1 5.5 6.2 6.8 7.6 8.1 7.0 Afghanistan 2.4 2.7 2.4 2.7 3.2 3.2 Bangladesh3,4 7.1 7.3 7.9 7.0 6.8 6.8 Bhutan 7.4 5.8 4.6 7.6 6.4 6.4 India 7.1 6.7 7.3 7.5 7.5 7.5 5.6 6.3 7.0 7.7 8.2 7.1 Maldives 6.2 7.1 8.0 6.3 5.6 5.6 Nepal3,4 0.6 7.9 6.3 5.9 6.0 6.0 Pakistan3,4 4.6 5.4 5.8 3.7 4.2 4.8 Sri Lanka 4.5 3.3 3.9 4.0 4.1 4.1 3.0 3.2 3.5 3.4 3.6 2.9 1.3 2.6 2.7 3.4 3.6 3.7 1.7 2.0 2.5 2.3 1.9 2.3 Angola -2.6 -0.1 -1.8 2.9 2.6 2.8 Benin 4.0 5.8 6.0 6.2 6.5 6.6 Botswana3 4.3 2.4 4.4 3.9 4.1 4.1 1.0 3.5 6.3 4.5 5.1 4.2 South Asia 3,4 3,4 Sub-Saharan Africa 5.9 6.3 6.0 6.0 6.0 6.0 -0.6 0.5 1.9 2.3 2.5 2.8 Cabo Verde 4.7 4.0 4.5 4.7 4.9 4.9 Cameroon 4.6 3.5 3.8 4.2 4.5 4.5 -6.3 -3.0 3.1 4.6 6.1 4.9 Comoros 2.2 2.7 2.7 3.1 3.1 3.1 Congo, Dem Rep 2.4 3.4 4.1 4.6 5.5 5.9 Congo, Rep -2.8 -3.1 1.0 3.2 -0.1 -1.5 Côte d'Ivoire 8.0 7.7 7.5 7.3 7.4 6.8 Burkina Faso Burundi Chad -8.5 -4.9 -8.8 -2.1 -5.8 -5.8 Eswatini 3.2 1.9 -0.6 1.7 1.8 1.8 Ethiopia3 8.0 10.1 7.7 8.8 8.9 8.9 Gabon 2.1 0.5 2.0 3.0 3.7 3.7 Gambia, The 0.4 4.6 5.3 5.4 5.2 5.2 Ghana6 3.7 8.5 6.5 7.3 6.0 6.0 Guinea 10.5 8.2 5.8 5.9 6.0 6.0 Guinea-Bissau 5.8 5.9 3.9 4.2 4.4 4.5 Kenya 5.9 4.9 5.7 5.8 6.0 6.0 4.7 4.7 5.4 5.7 6.3 Lesotho 3.1 -1.7 1.2 1.2 0.2 1.8 Liberia -1.6 2.5 3.0 4.5 4.8 4.8 Madagascar 4.2 4.2 5.2 5.4 5.3 5.3 Malawi 2.5 4.0 3.5 4.3 5.3 5.5 Mali 5.8 5.4 4.9 5.0 4.9 4.8 Mauritania 2.0 3.5 3.0 4.9 6.9 6.9 Mauritius 3.8 3.9 3.9 4.0 3.6 3.6 Mozambique 3.8 3.7 3.3 3.5 4.1 4.1 Namibia 0.6 -0.9 0.7 1.8 2.1 2.1 Niger 4.9 4.9 5.2 6.5 6.0 5.6 Nigeria -1.6 0.8 1.9 2.2 2.4 2.4 0.7 1.2 2.0 2.1 1.5 1.8 Rwanda 6.0 6.1 7.2 7.8 8.0 8.0 Senegal 6.2 7.2 6.6 6.6 6.8 6.9 Seychelles 4.5 5.3 3.6 3.4 3.3 2.9 Equatorial Guinea 234 S T A TI S T I C A L A P P E N D IX G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 Real GDP growth (continued) Annual estimates and forecasts1 2016 Quarterly growth2 2017 2018e 2019f 2020f 2021f 17Q2 17Q3 17Q4 18Q1 18Q2 18Q3e Sub-Saharan Africa (continued) Sierra Leone 6.3 3.7 3.7 5.1 6.3 6.3 South Africa 0.6 1.3 0.9 1.3 1.7 1.8 1.2 1.6 1.4 0.8 0.4 1.1 Sudan 4.7 4.3 3.1 3.6 3.8 3.8 Tanzania 7.0 7.1 6.6 6.8 7.0 7.0 7.8 6.8 8.4 Togo 5.1 4.4 4.5 4.8 5.1 5.1 Uganda3 4.8 3.9 6.1 6.0 6.4 6.5 6.4 7.0 6.1 6.2 5.0 Zambia 3.8 3.5 3.3 3.6 3.8 3.8 3.4 5.3 4.1 2.7 3.9 Zimbabwe 0.6 3.2 3.0 3.7 4.0 4.0 Source: World Bank and Haver Analytics Note: e = estimate; f = forecast Aggregate growth rates calculated using constant 2010 U.S dollars GDP weights Year-over-year quarterly growth of not-seasonally-adjusted real GDP, except for Ecuador, the Euro Area, Tunisia, and the United Kingdom Regional averages are calculated based on data from following countries East Asia and Pacific: China, Indonesia, Malaysia, Mongolia, Philippines, Thailand, and Vietnam Europe and Central Asia: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Hungary, Kazakhstan, FYR Macedonia, Poland, Romania, Russia, Serbia, Turkey, and Ukraine Latin America and the Caribbean: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Paraguay, Peru, and Uruguay Middle East and North Africa: Egypt, Iran, Kuwait, Qatar, Saudi Arabia, and Tunisia South Asia: India and Sri Lanka Sub-Saharan Africa: Botswana, Kenya, Nigeria, South Africa, Tanzania, Uganda, and Zambia Annual GDP is on fiscal year basis, as per reporting practice in the country GDP data for Pakistan are based on factor cost For Bangladesh, Bhutan, Nepal, and Pakistan, the column labeled 2017 refers to FY2016/17 For India, the column labeled 2016 refers to FY2016/17 Quarterly data are preliminary Growth rates reflect GDP data prior to recent rebasing Growth rates based on the production approach Click here to download data S T A TI S T I C A L A P P E N D IX G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 Data and Forecast Conventions The macroeconomic forecasts presented in this report are prepared by staff of the Prospects Group of the Development Economics VicePresidency, in coordination with staff from the Macroeconomics, Trade, and Investment Global Practice and from regional and country offices, and with input from regional Chief Economist offices They are the result of an iterative process that incorporates data, macroeconometric models, and judgment House Prices Indicators, IMF Balance of Payments Statistics, and IMF International Financial Statistics Data Data used to prepare country forecasts come from a variety of sources National Income Accounts (NIA), Balance of Payments (BOP), and fiscal data are from Haver Analytics; the World Development Indicators by the World Bank; the World Economic Outlook, Balance of Payments Statistics, and International Financial Statistics by the International Monetary Fund Population data and forecasts are from the United Nations World Population Prospects Country- and lending-group classifications are from the World Bank DECPG databases include commodity prices, data on previous forecast vintages, and inhouse country classifications Other internal databases include high-frequency indicators such as industrial production, consumer price indexes, house prices, exchange rates, exports, imports, and stock market indexes, based on data from Bloomberg, Haver Analytics, OECD Analytical Forecast Process The process starts with initial assumptions about advanced-economy growth and commodity price forecasts These are used as conditioning assumptions for the first set of growth forecasts for EMDEs, which are produced using macroeconometric models, accounting frameworks to ensure national account identities and global consistency, estimates of spillovers from major economies, and high-frequency indicators These forecasts are then evaluated to ensure consistency of treatment across similar EMDEs This is followed by extensive discussions with World Bank country teams, who conduct continuous macroeconomic monitoring and dialogue with country authorities Throughout the forecasting process, staff use macroeconometric models that allow the combination of judgement and consistency with model-based insights Aggregations Aggregate growth for the world and all sub-groups of countries (such as regions and income groups) is calculated as GDP-weighted average (at 2010 prices) of country-specific growth rates Income groups are defined as in the World Bank’s classification of country groups 235 236 S E L E CTE D TO P I C S G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 Global Economic Prospects: Selected Topics, 2015-19 Growth and Business Cycles Informality Growing in the shadow: Challenges of informality January 2019, Chapter Linkages between formal and informal sectors January 2019, Box 3.1 Regional dimensions of informality: An overview January 2019, Box 3.2 Casting a shadow: Productivity in formal and informal firms January 2019, Box 3.3 Under the magnifying glass: How policies affect informality? January 2019, Box 3.4 East Asia and Pacific January 2019, Box 2.1.1 Europe and Central Asia January 2019, Box 2.2.1 Latin America and the Caribbean January 2019, Box 2.3.1 Middle East and North Africa January 2019, Box 2.4.1 South Asia January 2019, Box 2.5.1 Sub-Saharan Africa January 2019, Box 2.6.1 The great disinflation January 2019, Box 1.1 Long-term growth prospects: Downgraded no more? June 2018, Box 1.1 Is the global economy turning the corner? January 2018, Box 1.1 Building solid foundations: How to promote potential growth January 2018, Chapter What is potential growth? January 2018, Box 3.1 Understanding the recent productivity slowdown: Facts and explanations January 2018, Box 3.2 Moving together? Investment and potential output January 2018, Box 3.3 The long shadow of contractions over potential output January 2018, Box 3.4 Productivity and investment growth during reforms January 2018, Box 3.5 East Asia and Pacific January 2018, Box 2.1.1 Europe and Central Asia January 2018, Box 2.2.1 Latin America and the Caribbean January 2018, Box 2.3.1 Middle East and North Africa January 2018, Box 2.4.1 South Asia January 2018, Box 2.5.1 Sub-Saharan Africa January 2018, Box 2.6.1 Weak investment in uncertain times: Causes, implications and policy responses January 2017, Chapter Investment-less credit booms January 2017, Box 3.1 Implications of rising uncertainty for investment in EMDEs January 2017, Box 3.2 Investment slowdown in China January 2017, Box 3.3 Interactions between public and private investment January 2017, Box 3.4 Inflation Growth prospects Global output gap Potential growth Investment slowdown G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 S E L E CTE D TO P I C S Global Economic Prospects: Selected Topics, 2015-19 Growth and Business Cycles Investment slowdown (continued) East Asia and Pacific January 2017, Box 2.1.1 Europe and Central Asia January 2017, Box 2.2.1 Latin America and the Caribbean January 2017, Box 2.3.1 Middle East and North Africa January 2017, Box 2.4.1 South Asia January 2017, Box 2.5.1 Sub-Saharan Africa January 2017, Box 2.6.1 Quantifying uncertainties in global growth forecasts June 2016, SF Who catches a cold when emerging markets sneeze? January 2016, Chapter Sources of the growth slowdown in BRICS January 2016, Box 3.1 Understanding cross-border growth spillovers January 2016, Box 3.2 Within-region spillovers January 2016, Box 3.3 East Asia and Pacific January 2016, Box 2.1.1 Europe and Central Asia January 2016, Box 2.2.1 Latin America and the Caribbean January 2016, Box 2.3.1 Middle East and North Africa January 2016, Box 2.4.1 South Asia January 2016, Box 2.5.1 Sub-Saharan Africa January 2016, Box 2.6.1 Having space and using it: Fiscal policy challenges and developing economies January 2015, Chapter Fiscal policy in low-income countries January 2015, Box 3.1 What affects the size of fiscal multipliers? January 2015, Box 3.2 Chile’s fiscal rule—an example of success January 2015, Box 3.3 Narrow fiscal space and the risk of a debt crisis January 2015, Box 3.4 Revenue mobilization in South Asia: Policy challenges and recommendations January 2015, Box 2.3 Education demographics and global inequality January 2018, SF Recent developments in emerging and developing country labor markets June 2015, Box 1.3 Linkages between China and Sub-Saharan Africa June 2015, Box 2.1 What does weak growth mean for poverty in the future? January 2015, Box 1.1 What does a slowdown in China mean for Latin America and the Caribbean? January 2015, Box 2.2 Forecast uncertainty Cross-border spillovers Fiscal space Other topics 237 238 S E L E CTE D TO P I C S G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 Global Economic Prospects: Selected Topics, 2015-19 Commodity Markets The role of the EM7 in commodity production June 2018, SF1, Box SF1.1 Commodity consumption: Implications of government policies June 2018, SF1, Box SF1.2 With the benefit of hindsight: The impact of the 2014–16 oil price collapse January 2018, SF1 From commodity discovery to production: Vulnerabilities and policies in LICs January 2016, Chapter After the commodities boom: What next for low-income countries? June 2015, Chapter 1, SF Low oil prices in perspective June 2015, Box 1.2 Understanding the plunge in oil prices: Sources and implications January 2015, Chapter What we know about the impact of oil prices on output and inflation? A brief survey January 2015, Box 4.1 Globalization of Trade and Financial Flows Poverty impact of food price shocks and policies January 2019, Chapter Arm’s-Length trade: A source of post-crisis trade weakness June 2017, SF The U.S economy and the world January 2017, SF Regulatory convergence in mega-regional trade agreements January 2016, Box 4.1.1 Can remittances help promote consumption stability? January 2016, Chapter Potential macroeconomic implications of the Trans-Pacific Partnership Agreement January 2016, Chapter Regulatory convergence in mega-regional trade agreements January 2016, Box 4.1.1 China’s integration in global supply chains: Review and implications January 2015, Box 2.1 What lies behind the global trade slowdown? January 2015, Chapter Monetary and Exchange Rate Policies The great disinflation January 2019, Box 1.1 Corporate debt: Financial stability and investment implications June 2018, SF2 Recent credit surge in historical context June 2016, SF1 Peg and control? The links between exchange rate regimes and capital account policies January 2016, Chapter Negative interest rates in Europe: A glance at their causes and implications June 2015, Box 1.1 Hoping for the best, preparing for the worst: Risks around U.S rate liftoff and policy options June 2015, SF1.1 Countercyclical monetary policy in emerging markets: Review and evidence January 2015, Box 1.2 Fiscal Policies Debt in low-income countries: Evolution, implications, and remedies January 2019, Chapter Debt dynamics in emerging market and developing economies: Time to act? June 2017, SF Having fiscal space and using it: Fiscal challenges in developing economies January 2015, Chapter Revenue mobilization in South Asia: Policy challenges and recommendations January 2015, Box 2.3 Fiscal policy in low-income countries January 2015, Box 3.1 What affects the size of fiscal multipliers? January 2015, Box 3.2 Chile’s fiscal rule—an example of success January 2015, Box 3.3 Narrow fiscal space and the risk of a debt crisis January 2015, Box 3.4 G L O B A L E CO N O MI C P R OS P E C TS | J A N U A R Y 20 S E L E CTE D TO P I C S Development Economics Prospects Group (DECPG): Selected Other Publications on the Global Economy, 2015-19 Commodity Markets Outlook Column1 The implications of tariffs for commodity markets October 2018, Box The changing of the guard: Shifts in industrial commodity demand October 2018, SF Oil exporters: Policies and challenges April, 2018, SF Investment weakness in commodity exporters January 2017, SF OPEC in historical context: Commodity agreements and market fundamentals October 2016, SF Energy and food prices: Moving in tandem? July 2016, SF Resource development in an era of cheap commodities April 2016, SF Weak growth in emerging market economies: What does it imply for commodity markets? January 2016, SF Understanding El Niño: What does it mean for commodity markets? October 2015, SF How important are China and India in global commodity consumption July 2015, SF Anatomy of the last four oil price crashes April 2015, SF Putting the recent plunge in oil prices in perspective January 2015, SF Inflation in Emerging and Developing Economies Inflation: Concepts, evolution, and correlates Chapter Understanding global inflation synchronization Chapter Sources of inflation: Global and domestic drivers Chapter Inflation expectations: Review and evidence Chapter Inflation and exchange rate pass-through Chapter Inflation in low-income countries Chapter Poverty impact of food price shocks and policies Chapter High-Frequency Monitoring Column1 Global Monthly newsletter Global Weekly newsletter 239 ECO-AUDIT Environmental Benefits Statement The World Bank Group is committed to reducing its environmental footprint In support of this commitment, we leverage electronic publishing options and print-on-demand technology, which is located in regional hubs worldwide Together, these initiatives enable print runs to be lowered and shipping distances decreased, resulting in reduced paper consumption, chemical use, greenhouse gas emissions, and waste We follow the recommended standards for paper use set by the Green Press Initiative The majority of our books are printed on Forest Stewardship Council (FSC)-certified paper, with nearly all containing 50-100 percent recycled content The recycled fiber in our book paper is either unbleached or bleached using totally chlorine-free (TCF), processed chlorine-free (PCF), or enhanced elemental chlorine-free (EECF) processes More information about the Bank’s environmental philosophy can be found at http://www.worldbank.org/corporateresponsibility G lobal economic prospects have darkened Financing conditions have tightened, industrial production has moderated, and trade tensions remain elevated The recovery in emerging market and developing economies has stalled, and some countries have experienced significant financial stress Downside risks have increased, including the possibility of disorderly financial market movements and escalating trade disputes It is thus critical to rebuild policy buffers while fostering potential growth by boosting human capital, promoting trade integration, and addressing informality In addition to discussing global and regional economic developments and prospects, this edition of Global Economic Prospects includes a chapter on the challenges posed by informality and associated policy options The report also contains pieces on the remarkable decline in EMDE inflation over the past four to five decades, rising debt vulnerabilities in low-income countries, and the implications of large spikes in food prices for poverty Global Economic Prospects is a World Bank Group Flagship Report that examines global economic developments and prospects, with a special focus on emerging market and developing countries, on a semiannual basis (in January and June) The January edition includes in-depth analyses of topical policy challenges faced by these economies, while the June edition contains shorter analytical pieces ISBN 987-1-4648-1343-6 SKU 211163