World Bank: Strong markets this year could lead to inflation, crash

Jan. 10 (UPI) -- The World Bank said Tuesday it expects 2018 to be another good year for growth, but that could lead to complacency in the market and serious inflation down the road.

In its latest Global Economics Prospect report, the World Bank forecasts global economic growth to continue growing by 3.1 percent this year as the recovery in trade, investment and manufacturing continues. But the current growth might only continue over the short-term.

"Over the longer term, slowing potential growth -- a measure of how fast an economy can expand when labor and capital are fully employed -- puts at risk gains in improving living standards and reducing poverty around the world," the Washington, D.C.-based organization said in a statement.

Franziska Ohnsorge, the lead author of the report, told the Guardian that stock markets are at levels similar to right before the Wall Street Crash of 1929.

"There could be faster than expected inflation that would mean faster than expected interest rate hikes," she said. "Financial markets are vulnerable to unforeseen negative news."

This year is projected to be the first since the global recession in 2007 that developed markets will be operating at or near capacity, but World Bank Group President Jim Yong Kim said, "this is no time for complacency."

"This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries' productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity," he said.