World Bank upgrades global growth forecasts as recovery strengthens

– ‘Downside risks’ –
The efforts by central banks to keep interest rates low has helped stabilize the global economy and fueled the recovery, Kose said in an interview.

However, “downside risks continue dominating the outlook,” he cautioned.

He warned that “history will repeat itself,” and like all recoveries, “this expansion will end at some point.”

Risks include rising debt levels, which are more concerning given that central banks are beginning to raise interest rates and could do so more quickly if the recovery starts to ignite inflation, Kose said.

Another risk are the “escalating trade restrictions.”

While Kose did not specifically name the United States, President Donald Trump has taken a very aggressive stance on trade policy.

The Republican has targeted China, hitting Beijing with numerous trade complaints, and sought to renegotiate free trade agreements, including the NAFTA pact with Canada and Mexico.

– Investment needed –
The World Bank said its report was “a clarion call for public action” to prevent growth from slowing.

Kose said increasing the ability of countries to grow faster is “the single most important issue for the global economy.”

The World Bank recommends a combination of improvements in education and health systems; high-quality investment; and labor and business reforms that together “could yield substantial long-run growth dividends and thus contribute to poverty reduction.”

Removing obstacles to getting women into the workforce is a key component for many countries, Kose said.

Potential growth was 2.5 percent from 2013 to 2017, 0.6 percentage points below its average a decade ago, with an even steeper decline in emerging market and developing countries, the bank said.

That decline is expected to widen further without investment.

“To arrest and possibly reverse this decline in potential growth, emerging market and developing economies need to accelerate investment in both physical and human capital,” the World Bank said.

“Today, the costs of neglecting these principles have gone sky-high.”