Developing countries need to focus on raising the growth potential of their economies while strengthening buffers to deal with risks from the Euro Area and fiscal policy in the US, says the World Bank in the newly-released Global Economic Prospects (GEP) report.
Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak.
“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,” Kim said.
The World Bank estimates global GDP grew 2.3 percent in 2012. Growth is expected to remain broadly unchanged at 2.4 percent in 2013, before gradually strengthening to 3.1 percent in 2014 and 3.3 percent in 2015.
In 2012 developing countries recorded among their slowest economic growth rates of the past decade, with GDP estimated to have grown 5.1 percent. Growth for developing countries is projected to expand by 5.5 percent in 2013, strengthening to 5.7 percent and 5.8 percent in 2014 and 2015, respectively.
Growth in high-income countries remains weak, with their GDP expanding only 1.3 percent in 2012 and is expected to remain the same in 2013.
Global trade of goods and services, which grew only 3.5 percent in 2012, is expected to accelerate, expanding by 6 percent in 2013 and 7 percent by 2015.
Downside risks to the global economy persist and include stalling of progress on the Euro Area crisis, debt and fiscal issues in the United States, the possibility of a sharp slowing of investment in China, and a disruption in global oil supplies.
“To assure resilience, developing countries need to gradually rebuild depleted fiscal and monetary buffers, and improve social safety nets and food security,” said Andrew Burns, manager of Global Macroeconomics and lead author of the report.
With governments in high-income countries struggling to make fiscal policies more sustainable, developing countries should resist trying to anticipate every fluctuation in developed countries and, instead, ensure that their fiscal and monetary policies are robust and responsive to domestic conditions,” said Kaushik Basu, senior vice president and chief economist at World Bank.