The World Bank, which last June projected global economic growth of 3% for 2013, has cut its forecast to 2.4% because of a slower than expected recovery in developed nations.
The bank estimates that global gross domestic product (GDP) grew 2.3% in 2012, against its projection last summer of 2.5%. This year is now seen as little changed, at 2.4%, before growth strengthens to 3.1% in 2014 and 3.3% in 2015. Developing countries’ GDP is estimated to have grown 5.1% in 2012, and is projected to strengthen to 5.5% this year, and to 5.7% and 5.8% in 2014 and 2015 respectively.
In the latest edition of its biannual
Global Economic Prospects
report, the bank comments: “What we are seeing is a recovery we anticipated in June being pushed a little further back in time, beginning closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier.
“You can keep markets calm for one or two years, but if this is not backed up with real growth you could get another round of financial risks coming in.”
The report predicts a 0.1% contraction this year for the eurozone, against a forecast last June of 0.7% growth in 2013, but will edge back into recovery with 0.9% growth in 2014 and 1.4% in 2015. It forecasts that the US economy will grow by 1.9%, although this is contingent on attempts by Washington’s politicians to resolve the issue of the US fiscal cliff proving successful.
The bank comments that although conditions in the financial markets are calmer than a year ago, the improvement is not reflected in stronger growth. Downside risks to the global economy, although diminished, are persisting and include a stalling of progress on resolving the eurozone crisis, debt and fiscal issues in the US, a potential sharp slowdown of investment in China, and a disruption in global oil supplies.
It also calls upon developing countries such as India and Brazil to safeguard their economic growth, given the continuing fragility of the global economy. “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.
“Developing countries have remained remarkably resilient thus far. But we can’t wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education.”
According to the report, business between developing countries now accounts for more than 50% of their total exports, against 39% in 2002. Since 2000, trade between developed nations has averaged annual growth of 7.3%, while exports from developed nations to developing economies have increased at 11.8%.
“The weakness in high income countries is dampening developing country growth, but strong domestic demand and growing South-South economic linkages have underpinned developing country resilience – to the point that, for the second year in a row, developing countries were responsible for more than half of global growth in 2012,” said Hans Timmer, director, development prospects group, World Bank.
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