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The World Bank is downgrading its 2016 global growth forecast to 2.4% from the already sluggish 2.9% pace projected in January.
According to the latest update by the institution, exporting emerging market and developing economies have struggled to adapt to lower prices for oil and other key commodities, and this accounts for half of the downward revision.
Growth in these economies is projected to advance at a meagre 0.4% pace this year, a sharp downward revision of 1.2% from the January outlook.
World Bank says that while metal prices have rallied from January lows on expectations of stronger demand, ongoing supply rebalancing from production cuts and lower investment in new capacity, markets remain oversupplied.
Stockpiles remain elevated and prospects are for continued increases in capacity resulting from earlier large investments, notably for iron ore (Australia), copper (Peru) and aluminum (China) according to the report. The prospects for zinc are brighter thanks to the closure of large zinc mines in 2015 in Australia and Ireland.
On the whole metal prices are projected to decline 15% in 2016 and to rise moderately in the medium term as the expansion of capacity slows, but the timing will vary by individual metals.
As the graph shows, the World Bank has lowered its outlook for metal and energy prices from predictions in its January report and now see a slower recovery for metals and mining:
Source: World Bank Global Economic Prospects, Haver Analytics.
Shaded area indicate forecasts. Solid lines show the current forecasts, dotted lines show the World Bank January 2016 assumptions
