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World Bank warns trade war will damage global economy

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WASHINGTON Trade conflict between the world's two largest economic powers already is inflicting collateral damage and threatens to do yet more harm to the global economy, the World Bank warned on Tuesday.

And the global slowdown is starting as government and corporate debt rise, especially among the poorest countries while mounting interest rates raise borrowing costs, the bank said in its semi-annual Global Economic Prospects report.

The report was more pessimistic than a year ago and peppered with exhortations to take "urgent", "imperative" or "critical" action.

"Risks are rising," senior World Bank economist Ayhan Kose told AFP.

"The global economy is going through a difficult period."

Growth of the world economy is expected to slow to 2.9 per cent this year and 2.8 per cent next year, slightly below the previous forecast, and the estimates for nearly all regions and countries were downgraded.

At the centre of the turmoil, US economic growth is expected to slow this year by four tenths of a point, falling to 2.5 per cent down from 2.9 per cent last year, and to slow even further next year to 1.7 per cent.

China's economy also is slowing amid the trade dispute, and growth should slip to 6.2 per cent this year and next.

Mr Kose, who heads the World Bank's Development Prospects Group - which twice a year produces the global economic forecasts - said he hoped for a resolution but meanwhile urged governments to prepare for a difficult road ahead.

"Global growth is still robust, but whether a storm will hit or it will clear highly depends on how policymakers are going to react," he said.- AFP