World Bank Slashes Global Growth Forecasts

Trading Tips

Lower Projections Cited

The World Bank has released its latest set of economic growth forecasts for the year and is now projecting a deeper downturn than previously forecasted. The “June 2020 Global Economic Prospects” release comes just days after an explosive US jobs number which raised questions over the current economic projections, namely whether the post-lockdown recovery might happen at a quicker rate than forecast.

In its latest update the World Bank said: “The COVID-19 pandemic has spread with alarming speed, infecting millions and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus.

The World Bank now forecasts 2020 global growth to fall by 5.2%. This marks a significant  increase on the 3.9% contraction forecast by the IMF in April and will mark the “deepest global recession in decades”.

The update comes with a warning that an even greater downturn could transpire if subsequent outbreaks of the virus materialise. The World Bank’s forecast assumes a baseline scenario of social and economic restrictions lifting in June. However, in the statement it notes that that “Even this bleak outlook is subject to great uncertainty and significant downside risks.” Specifically, the World Bank notes that “Should COVID-19 outbreaks persist, should restrictions on movement be extended or reintroduced, or should disruptions to economic activity be prolonged, the recession could be deeper.” In its downside scenario, whereby further peaks emerge and restrictions are reintroduced, the World Bank forecasts that global growth could fall by as much as 8% in 2020.

Downside Risks Remain

Looking ahead, the forecast warns that the current crisis is likely to have long last effects on output and productivity as a result of “lingering repercussions”. The forecast noted that “Many emerging and developing economies were already experiencing weaker growth before this crisis; the shock of COVID-19 now makes the challenges these economies face even harder.

While data sets over recent weeks have given plenty of cause for optimism, specifically the US labour reports last week, central bankers have been highly vocal in their warnings over the great deal of uncertainty which remains and the inherent downside risks clouding the outlook.

Technical Views

DXY (Bearish below 97.10)

From a technical viewpoint. The DXY remains below the yearly pivot at 97.10 and while below here, remains on course to complete the equality projection into the 95.99 level. Back above the pivot, however, and the 98.25 level will come back into view as the next key resistance.

World Bank Slashes Global Growth Forecasts

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