The World Bank has warned that global growth will fall to just 2.4% in 2016, down from its January forecast of 2.9%. According to its half-yearly report, the world economy is suffering from persistently low commodity prices and reduced global trade. The report also paints a bleak global outlook for the next three years, warning that private debt levels are increasing.
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It added that 50% of the downward revision was because of the slow pace of economic expansion in developed economies and commodity exporting nations that "have struggled to adapt to lower prices for oil and other key commodities". The benefit of cheaper oil prices for crude importing nations such as Europe and Japan has failed to offset a slowdown in oil-exporting regions that depend on selling energy to sustain their incomes, the bank said.
"Investment continues to be soft amid weaker growth prospects and elevated policy uncertainty, while export growth has slowed reflecting subdued external demand. Despite an expected boost from lower energy prices, and the ongoing improvement in labour markets, growth is projected to level off in 2016 rather than accelerate," the bank said.
On the UK, the World Bank said its economy is expected to grow by a mere 2% in 2016 and by 2.1% in 2017. It said uncertainty over the outcome of the EU Referendum vote had already lowered the UK pound, economic activity and confidence levels in the country.
The bank reduced its growth forecasts for oil producing nations such as Latin America and the Middle East. Overall for emerging economies, the bank said growth would be at an average of 3.5% for the year, while for advanced economies, the bank estimated the average growth rate to be at 1.7%.
In order to boost growth, Kaushik Basu, the World Bank's chief economist, said: "Against this backdrop of weak growth, pronounced risks, and limited policy space, policymakers in emerging and developing economies should put a premium on enacting reforms, which, even if they seem difficult in the short run, foster stronger growth in the medium and the long run."
He added: "Among these measures, efforts to invest in infrastructure and education, health and other human skills and wellbeing, as well as initiatives to promote economic diversification and liberalise trade, will boost growth prospects and improve standards of living. The international community has an important role to play in the pursuit of these goals."