Advanced Nations Holding Back Global Growth: World Bank
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The World Bank has reduced its global growth forecast from 3 percent to 2.4 percent in 2013, projecting that the downturn in Europe and fiscal problems in the United States will continue to weigh on investment and spending.
Andrew Burns, lead author of the World Bank’s twice-yearly Global Economic Prospects report, said that a recovery the bank had previously anticipated will be delayed, beginning “closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier.”
The World Bank has reduced its global growth forecast from 3 percent to 2.4 percent in 2013, projecting that the downturn in Europe and fiscal problems in the United States will continue to weigh on investment and spending.
Andrew Burns, lead author of the World Bank’s twice-yearly Global Economic Prospects report, said that a recovery the bank had previously anticipated will be delayed, beginning “closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier.”
In its last forecast in June, the bank had projected that global growth would reach 3.0 percent in 2013, up from 2.3 percent in 2012.
Citing fiscal instability and a loss of confidence in U.S. markets, high unemployment in austerity whipped Europe as well as Japan’s diplomatic tensions with China, the bank said the global economic environment remains fragile and “prone to further disappointment.”
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Although financial markets are calmer than they were last year, it is not reflected in growth, the bank said. “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,” Burns wrote.
However, the Bank acknowledged that upside and downside risks to its forecasts were more balanced than a year ago. “Although the risks are similar to the risks we were looking at a year ago, the amplitude of those potential risks is greatly reduced now,” Burns said. “The likelihood that they’d be realised has declined significantly.”
According to World Bank chief economist Kaushik Basu, the year 2013 “is going to be an interesting year where we do expect that some of the global driving is going to move on to developing countries.”
Accounting for more than half of global growth last year, the World Bank estimates that developing countries would see a more robust 5.5 percent growth this year. While that is slower than their pace of growth over the past decade, it is still far faster than their average growth rate of about 3.5 percent in the 1970s and 1980s.
In a statement, World Bank president Jim-Yong Kim said:
[quote] Developing countries have remained remarkably resilient thus far. But we can’t wait for a return to growth in the high-income countries. We have to continue to support developing countries in making investments in infrastructure, in health, in education. [/quote]
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