Friday, January 14, 2011

Global growth to slow: World Bank

The global economy is heading towards a slower but still solid and more sustainable phase of growth, according to a World Bank Global Economic Prospects 2011 report released on Thursday.

Developing countries are seen contributing almost half of the global growth in 2011.

Global growth is estimated to have increased 3.9% in 2010, but is forecast to slow 3.3% in 2011, followed by a 3.6% increase in 2012.

The global economic recession of 2008-9 was reflected in the growth figures. Global growth fell 2.1% in 2009.

While most of the reports being released paint a bleak picture for the developed world, more praises continue for developing economies.

The Global Economic Prospects 2011 report expects developing economies to grow between 5.7% and 6.2% each year from 2010 to 2012, with sub-Saharan Africa's output forecast to have expanded by an estimated 4.7% in 2010.

The report says SA's economic growth is projected to pick up to 3.5% and 4.1% in 2011 and 2012 respectively as global conditions improve.

Economic recovery in several economies in emerging Europe and central Asia - as well as some high-income countries - is tentative, according to the report.

It suggests that, without what it terms corrective domestic policies, high household debt, unemployment, weak housing and banking sectors are likely to mute recovery.

"Strong developing-country domestic demand growth is leading the world economy, yet persistent financial-sector problems in some high-income countries are still a threat to growth and require urgent policy actions," said Justin Yifu Lin, the World Bank's chief economist and senior vice-president for development economics.

The impact of rising global food prices is highlighted in the report. It says relatively high food prices are having a mixed effect.

In many economies, dollar depreciation, improved local conditions, and rising prices for goods and services means that the real price of food has not risen as much as the US dollar price of internationally traded food commodities, it says.

"However, double-digit price increases of key staples in the past few months are pressuring households in countries with an already existing high burden of poverty and malnutrition," cautioned Andrew Burns, manager of global macroeconomics in the World Bank's Prospects Group.

"And, if global food prices rise further along with other key commodities, a repeat of the conditions in 2008 cannot be excluded."

On regional growth, the East Asia and Pacific region is forecast to grow by 8% in 2011, down from an estimated 9.3% in 2010 as the pace of the global recovery eases.

Growth in Europe and central Asia is expected at 4.2% in both 2011 and 2012, following a 6.6% decline in GDP during 2009. The region is seen expanding by 4.7% in 2010.

According to the report, the south Asia region is projected to post growth of 7.9% on average over the 2011-12 fiscal years, buoyed by vibrant growth in India.

After advancing 3.3% in 2010, the Middle East and north Africa region is expected to enjoy stronger gains of 4.3% and 4.4% in 2011 and 2012 respectively, as domestic demand growth continues, export markets firm, and oil prices remain at high levels.

The Latin America and Caribbean region's growth is forecast to slow a little to about 4% in 2011 and 2012, largely because of a weaker external environment as growth in advanced economies and China moderates.

"Several countries in the region have been subject to potentially destabilising capital inflows that have contributed to strong upward pressure on some currencies," the report noted.

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