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World Bank President David Malpass said the global economic outlook is deteriorating amid Brexit-related uncertainty, trade tensions and a downturn in Europe.
“Global growth is slowing,” Malpass said in Montreal on Monday in a speech ahead of the the IMF and World Bank annual meetings. The world economy now looks even weaker than the bank’s June forecast for 2.6% growth in 2019, “hurt by Brexit, Europe’s recession and trade uncertainty,” he added.
Malpass renewed his global growth warning as investors are keeping an eye on several major issues that could come to a head this month.
High-level U.S.-China trade talks resume this week -- before the next planned tariff escalation Oct. 15 -- and U.K. Prime Minister Boris Johnson has pledged to take Britain out of the European Union on Oct. 31 without a deal if necessary. Meanwhile, economic indicators from Europe are flashing red as a slump in manufacturing increasingly affects domestic demand.
Malpass repeated his criticism of the roughly $15 trillion of bonds with zero or negative yields, describing it as “frozen capital” that’s diverting resources from growth and benefiting bondholders and issuers of the debt.
The heads of the global institutions are gathering amid growing concern about how threats from U.S. President Donald Trump’s trade wars to Brexit are weighing on world expansion. There are also fresh faces in place after IMF chief Christine Lagarde left to lead the European Central Bank and was succeeded by Bulgarian economist Kristalina Georgieva, formerly chief executive of the World Bank.
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The IMF has also indicated it may lower its 2019 outlook from after the fund in July projected 3.2% growth -- the lowest since the financial crisis. The IMF is preparing to release its updated forecast next week.
Trump nominated Malpass in February, choosing a supporter who’d criticized China and backed a shakeup of the global economic order. Malpass, who previously portrayed the lender as inefficient and reluctant to cut funding for developing countries that grow into dynamic emerging markets, was selected in April to serve a five-year term.
--With assistance from Sandrine Rastello.
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