David Malpass, the new president of the World Bank who was tapped for the job by Donald Trump, has lamented a “deepening slowdown in global trade” but refrained from rebuking the White House with a more pointed call for de-escalation.
Mr Malpass’s comments on Tuesday came as the multilateral lender downgraded its global growth forecasts to 2.6 per cent for 2019, from a projection of 2.9 per cent in January — the latest in a series of gloomy economic projections by international economic institutions.
“There’s been a tumble in business confidence, a deepening slowdown in global trade, and sluggish investment in emerging and developing economies,” Mr Malpass told reporters. “The global economic outlook, in both the near- and long-term, is confronting substantial challenges.”
The World Bank’s forecasts were released as concern mounted around the globe about Mr Trump’s trade policies, including new steps he has unveiled in recent weeks to increase tariffs on both China and Mexico, the two largest US trading partners.
Last month Washington raised levies on $200bn of Chinese goods from 10 per cent to 25 per cent, and threatened to impose 25 per cent tariffs on a further $300bn of imports from China as soon as this month.
In addition, Mr Trump has threatened to slap tariffs of 5 per cent on Mexican goods starting next week, and promised that the rate would rise to 25 per cent by October unless Mexican did more to contain migration to the US.
While the heads of large multilateral institutions are generally reluctant to single out individual member states for implementing policies that could harm the global economy, the chiefs of the World Bank, the IMF and the WTO have traditionally been outspoken about the dangers of protectionism — a position that Mr Malpass was less comfortable adopting on Tuesday.
Ayhan Kose, director of the prospects group at the World Bank and author of the projections, was far more blunt, saying that the 2020 forecast, which currently has growth at 2.7 per cent, could be slashed by a full percentage point to 1.7 per cent if more protectionist policies materialised.
“If trade tensions escalate and we see much higher tariffs put on very large segments of global trade . . . it is very likely that we will see a deeper slowdown,” Mr Kose told reporters. “This slowdown will take place in major economies [and] will have significant spillovers through trade channels, through confidence channels, through commodity markets.”
Mr Kose noted that if there were an “improvement” in the trade disputes, it would “help improve confidence, reduce uncertainty and this will probably put a floor on the slowdown”.
“This is a path policymakers can take and can lead to much better prospects for global economic growth,” he added.
The biggest downgrades to the World Bank forecasts were for Europe and central Asia; the region is now expected to grow by just 1.6 per cent this year, a 0.7 percentage point drop compared to January. The World Bank also cut its forecast for Sub-Saharan Africa, which is expected to grow by 2.9 per cent, a 0.5 percentage point drop.
Mr Malpass said “rising trade barriers” were only one factor weighing on the outlook, adding that “build-up of government debt” was another constraint, along with “poor business environments, labour and product market controls, and weak governance” in developing countries.
A former senior official at the Treasury department under Mr Trump, the US president nominated Mr Malpass for the role in February, following the resignation of predecessor Jim Yong Kim.
Mr Malpass was formally chosen to lead the World Bank by the board of the institution in April after no rival candidate emerged to challenge him during a six-week campaign.