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World Bank chief warns of steeper global growth slowdown

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World Bank president David Malpass said the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.

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David Malpass: “The global economic outlook, in both the near- and long-term, is confronting substantial challenges.” Credit:Bloomberg

“The slowdown in global growth is broad based,” Malpass said Tuesday in a speech in Washington. Recent developments signal the 2019 world expansion will likely to fall short of the lender’s June projection of 2.6 per cent in real terms, Malpass said. The nominal growth rate appears poised to slow to less than 3 per cent – “a big letdown” from the about 6 per cent pace in 2017 and 2018, he said.

Roughly $US15 trillion ($22 trillion) of bonds with zero or negative yields indicate that investors accept “the market’s premise of very low or even negative returns for years, even decades,” he said. “This frozen capital implies slower future growth.”

The comments by Malpass at the Peterson Institute for International Economics in Washington, his first major public address since taking office in April, come as the global economic outlook dims ahead of next month’s annual meetings of the bank and the International Monetary Fund. The fund is preparing to update its growth forecast in the new World Economic Outlook, after reducing the projection, already the lowest since the financial crisis, in July to 3.2 per cent this year.

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