Global Economy at Turning Point: WBStaff Correspondent
The world economy is projected to strengthen this year, with growth picking up in developing countries and high-income economies appearing to be finally turning the corner five years after the global financial crisis, says the World Bank’s newly-released Global Economic Prospects (GEP) report.
The released published on January 14.
The firming of growth in developing countries is being bolstered by an acceleration in high-income countries and continued strong growth in China.
However, growth prospects remain vulnerable to headwinds from rising global interest rates and potential volatility in capital flows, as the United States Federal Reserve Bank begins withdrawing its massive monetary stimulus.
‘Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery,’ said World Bank Group president Jim Yong Kim.
‘The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets.’
Global GDP growth is projected to firm from 2.4 percent in 2013 to 3.2 percent this year, stabilizing at 3.4 percent and 3.5 percent in 2015 and 2016, respectively, with much of the initial acceleration reflecting stronger growth in high-income economies.
Growth in developing countries will pick up from 4.8 percent in 2013 to a slower than previously expected 5.3 percent this year, 5.5 percent in 2015 and 5.7 percent in 2016.
While the pace is about 2.2 percentage points lower than during the boom period of 2003-07, the slower growth is not a cause for concern.
Almost all of the difference reflects a cooling off of the unsustainable turbo-charged pre-crisis growth, with very little due to an easing of growth potential in developing countries.
Moreover, even this slower growth represents a substantial (60 percent) improvement compared with growth in the 1980s and early 1990s.
For high-income countries, the drag on growth from fiscal consolidation and policy uncertainty will ease, helping to boost economic growth from 1.3 percent in 2013 to 2.2 percent this year, stabilizing at 2.4 percent for each of 2015 and 2016.
Amongst high-income economies, the recovery is most advanced in the US, with GDP expanding for 10 quarters now.
The US economy is projected to grow by 2.8 percent this year (from 1.8 percent in 2013), firming to 2.9 and 3.0 percent in 2015 and 2016, respectively. Growth in the Euro Area, after two years of contraction, is projected to be 1.1 percent this year, and 1.4 and 1.5 percent in 2015 and 2016, respectively.
‘Global economic indicators show improvement. But one does not have to be especially astute to see there are dangers that lurk beneath the surface. The Euro Area is out of recession but per capita incomes are still declining in several countries. We expect developing country growth to rise above 5 percent in 2014, with some countries doing considerably better, with Angola at 8 percent, China 7.7 percent, and India at 6.2 percent. But it is important to avoid policy stasis so that the green shoots don't turn into brown stubble,’ said Kaushik Basu, senior vice president and chief economist at the World Bank.
Source: WB release
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