Less volatile, but smaller growth: World Bank
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Though cutting the global economic forecast from 2.4 per cent to 2.2 per cent, the World Bank said that the global economy is transitioning into what is likely to be a smoother and less volatile period.
The recovery is uneven, though. For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will continue to dampen growth this year, while growth in the developing world will be solid but weaker than during the pre-crisis boom period.
In the report "Global Economic Prospects: Less Volatile, but slower growth", the World Bank expects the global GDP to expand about 2.2 per cent this year and strengthen to 3.0 per cent and 3.3 per cent in 2014 and 2015. For high-income countries, growth this year will be a modest 1.2 per cent, firming to 2.0 per cent in 2014 and 2.3 per cent by 2015. The Euro Area is now estimated to contract by 0.6 per cent in 2013, compared with the previous forecast of 0.1 per cent, and is projected to slowly improve to a modest 0.9 per cent in 2014 and 1.5 per cent in 2015.
The story for developing countries is, for the most part, rosier. Developing economies have more or less completely recovered from the 2008 crisis and less volatile external conditions are expected to yield a gradual acceleration of activity in developing regions.
Developing-country GDP is now projected to be around 5.1 per cent in 2013, strengthening to 5.6 per cent and 5.7 per cent in 2014 and 2015, respectively. Growth in several middle income countries has been held back by supply bottlenecks and is unlikely to reach pre-crisis rates unless supply-side reforms are pursued vigorously. In China also, growth has slowed as authorities seek to rebalance the economy. Looking at broader region-wide trends, East Asia is expected to grow by 7.3 per cent this year; developing Europe and Central Asia by 2.8 per cent; Latin America by 3.3 per cent; Middle East & North Africa (MENA) by 2.5 per cent; South Asia by 5.2 per cent and Sub-Saharan Africa by 4.9 per cent.
Among developing countries, Thailand is among those which are "doing fine". Output gaps in most developing economies are small, and appear to be closing and policy appears broadly to be on track.
Withdrawal of QE in the United States is one of four new risks that developing countries are facing, World Bank said. The others the potential effects of the radical relaxation of both fiscal and monetary policy in Japan, a faster-than-expected decline in commodity prices, and domestic challenges including inflationary pressures and asset price bubbles as well as weaker-than pre-crisis growth rates.
