The World Bank (WB) launched its Global Economic Prospects Report on January 21, 2013, in Ha Noi, describing the world economy as “fragile” and estimating a weak growth for the globe.
Accordingly, the institution estimates that global GDP grew modestly at 2.3% in 2012. The rate is expected to remain broadly unchanged at 2.4% in 2013, before gaining a boost to reach 3.1% in 2014 and 3.3% in 2015.
Developing economies are named the main driver behind the global growth, but their output has slowed as “the majority of the countries are operating at or close to full capacity”, said Andrew Burns, Manager of the Macroeconomics Team and lead author of the Global Economics Prospects.
For them, additional demand stimulus could be counter-productive, which indicates raising indebtedness and inflation without significant payoff in terms of additional growth.
Developing countries’ growth rate in 2012 was the slowest in the past ten years, at an estimated 5.1%. The rate is projected to expand by 5.5% in 2013, 5.7% in 2014 and 5.8% in 2015.
Meanwhile, high-income countries’ growth remains weak, with their GDP expanding by only 1.3% in 2012 and expected to stay at the 2012 rate in 2013. The figure should be gradually increased to 2% in 2014 and 2.3% by 2015.
The Euro zone is expected to face hardships as its estimated GDP contracts by 0.1% in 2013, fallen into negative territory, before edging up to 0.9% in 2014 and 1.4% in 2015.
Global Economic Prospects report also draws out consequences of some worst scenarios involving the Euro crisis and US policy failure.
Accordingly, if policies to improve country-level finances in the Euro zone fail to maintain their reform momentum, a provoked global slowdown could potentially subtract 1.1% or more from developing countries’ GDP.
Meanwhile, the uncertainty over the stance of US fiscal policy could lead to a loss of confidence in the currency and an overall increase in market tensions, reducing US and global growth by 2.3% and 1.4%, respectively.
Andrew Burns, during his presentation on the report, suggested: “In a slow and volatile external environment, sustained strong growth in developing countries will depend on productivity enhancements, investments in infrastructure, human capital and governance”.
Given the still uncertain global environment, many developing countries are advised to “gradually restore depleted fiscal and monetary buffers” so as to ensure that their economies can respond as “resiliently” as they did during the 2008-09 crisis and prevent a further significant external shock from arising.
The World Bank's Global Economic Prospects examines growth trends for the global economy and how they affect developing countries. For this year the twice-yearly report was released in January 2013 and titled “Assuring Growth Over the Medium Term”./.