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| World Bank President Jim Yong Kim [PHOTO: Simone D. McCourtie /World Bank/CC BY-NC-ND 2.0] |
Washington: Four years after the onset of the global financial crisis,
the world economy remains fragile and growth in high-income countries is weak.
Developing countries need to focus on raising the growth potential of their
economies, while strengthening buffers to deal with risks from the Euro Area
and fiscal policy in the United States, says the World Bank in the
newly-released Global Economic Prospects (GEP) report.
"The economic recovery remains fragile and uncertain,
clouding the prospect for rapid improvement and a return to more robust
economic growth," said World Bank Group President Jim Yong Kim. He added that "the outlook is weak in
both high-income and developing country economies. So despite, promising and
sometimes even courageous measures taken in Europe, there, issues remain in the
Eurozone and of course we still have fiscal policy issues in the United States.
The risks from this situation are substantial, especially for developing
countries that remained remarkably resilient thus far."
Last year developing countries recorded among their slowest
economic growth rates of the past decade, partly because of the heightened Euro
Area uncertainty in May and June of 2012. Since then, financial market
conditions have improved dramatically. International capital flows to
developing countries, which fell 30 percent in the second quarter of 2012, have
recovered and bond spreads have declined to below their long-term average
levels of around 282 basis points. Developing-country stock markets are up 12.6
percent since June, while equity markets in high-income countries are up by
10.7 percent. However, the real-side of the economy has responded modestly.
Output in developing countries has accelerated, but is being held back by weak
investment and industrial activity in advanced economies.
Yong Kim said that "I worry for example, about the low
stocks of wheat and maize which could cause once again a crisis in food prices,
which we know will affect the poorest the most."
He also said that what the World Bank was suggesting was
"that we cannot wait for the return to growth in the high- income
countries. We really need developing countries to think about setting the stage
for medium and long-term growth. We have
to continue to support developing countries in making investments in
infrastructure, in health, in education. This will set the stage, this will set
the foundations, for the growth that we know that they can achieve in the
future".
The World Bank estimates global GDP grew 2.3 percent in
2012, compared with last June's expectation of 2.5 percent. Growth is expected
to remain broadly unchanged at 2.4 percent growth in 2013, before gradually
strengthening to 3.1 percent in 2014 and 3.31 percent in 2015.
Developing-country GDP is estimated to have grown 5.1 percent in 2012, and is
projected to expand by 5.5 percent in 2013, strengthening to 5.7 percent and
5.8 percent in 2014 and 2015, respectively. Growth in high-income countries has
been downgraded from earlier forecasts, at 1.3 percent for 2012 and 2013,
firming to 2.0 percent in 2014 and 2.3 percent by 2015. Growth in the Euro Area
is now projected to only return to positive territory in 2014, with GDP
expected to contract by 0.1 percent in 2013, before edging up to 0.9 percent in
2014 and 1.4 percent in 2015. Overall, global trade of goods and services,
which grew only 3.5 percent in 2012, is expected to accelerate, expanding by
6.0 percent in 2013 and 7.0 percent by 2015.
Downside risks to the global economy include: a stalling of
progress on the Euro Area crisis, debt and fiscal issues in the United States,
the possibility of a sharp slowing of investment in China, and a disruption in
global oil supplies. However, the likelihood of these risks and their potential
impacts has diminished, and the possibility of a stronger-than-anticipated
recovery in high-income countries has increased.
Although fiscal sustainability in most developing countries
is not an issue, government deficits and debt are much higher today than in
2007. -UNifeed