The World Bank said, in its latest Global Economic Prospects – June report, that global growth is set to slow over the next two years as central banks move towards higher interest rates as well as the start of a US fiscal stimulus.
“Global growth has eased, but remains robust, and is projected to reach 3.1% in 2018 and 3% in 2019,” according to the World Bank.
Previously, the World Bank estimated global growth at 3.1% in 2017 compared to 2.4% in 2016, which was down from 2.8% in 2015.
The report continued that global growth is expected to edge down in the next two years to 2.9% by 2020.
The report explained that growth is expected to slow in 2020 “as global slack dissipates, trade and investment moderate, and financing conditions tighten.”
Risks are tilted to the downside and include the threat of a sudden contraction in global credit and a spike in protectionism.
Concerning growth in advanced economies, the report stated that it is expected to decelerate toward potential rates over the forecast period, as monetary policy stimulus is pared down, higher energy prices weigh on consumption, and the effect of US fiscal expansion weigh in.
In terms of Egypt, which is considered an emerging market and developing economy (EMDE), the bank upgraded its forecast for the growth in Egypt to grow by 5% this year, up from 4.5% in its estimation in January, and said it is expected to grow 5.5% next year compared to 5.3% in its January estimation.
In terms of the interest rate in Egypt, previously, Tarek Amer, governor of the Central Bank of Egypt (CBE), said that one of the most important variables that the CBE takes into account when determining
the interest rate is the changes that happen in oil prices globally.
Amer added that the bank is also taking into account a number of other global economic factors, including the impact of the Trump administration’s withdrawal from the Iran nuclear deal on the markets.
Noteworthy, the CBE cut interest rates 1% (100 basis points) twice this year, first in mid-February and again in late March, bringing interest rates to 16.75% for deposits and 17.75% for lending.