Economist: falling world GDP growth is associated with developing markets

Economist: falling world GDP growth is associated with developing markets


The situation, said General Director of analytical Agency Washington Smith’s Research & Gradings Terence Smith, have deteriorated due to an increase in the Federal reserve system of the USA.

WASHINGTON, 7 Jan. The lower world Bank forecast for global growth in 2016 objectively reflects the negative impact of the slowing Chinese economy and recession in other emerging markets, said General Director of analytical Agency Washington Smith’s Research & Gradings Terence Smith.

The world Bank on Wednesday lowered its forecast for global growth in 2016 to 2.9% from 3.3% forecast in June. The Bank expects that the global economy will accelerate the pace of growth compared with 2.4% in 2015. Developing countries will “grow” by 4.8%, USA 2.7%, the Eurozone at 1.7%, China growth will slow to 6.7%, predicts finstitut.

“Last summer, the world Bank said that emerging markets are confronted with opposing winds in response to the falling commodity prices, China’s economy also began to slow down,” reminds the expert.

Now, due to an increase in the Federal reserve system of the USA, the situation has deteriorated — not only companies in emerging markets face higher borrowing costs, but the rest of them. In addition, businesses have to fight restrictions on access to capital markets, since investors are more attracted to securities denominated in the strong U.S. dollar, and investments in the real sector, he said.

“The situation is reflected in the U.S. market. In the last 12 months, Chinese businesses are the most heavily invested in U.S. assets. However, Chinese investors were the largest buyers of real estate in all the world,” he continued.

It so happened that the slowdown in economic growth in emerging markets and the main driver of the Chinese economy affects the wealth of the rest of the globe. Therefore, in order to restore sustainable growth in the world economy, it is necessary to return investor confidence in emerging markets, sums up the expert.