While there are markers of hope in the financial sector, the slowdown in the real economy is turning out to be unusually protracted, says the World Bank in the newly-released Global Economic Prospects (GEP) report. However, risks from advanced economies have eased and growth is now firming.
Global GDP is expected 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.
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 Brazil, India, Russia, South Africa and Turkey has been held back by supply bottlenecks, according to the World Bank. While external risks have eased, growth in these countries is unlikely to reach pre-crisis rates unless supply-side reforms are completed. In China also, growth has slowed as authorities seek to rebalance the economy.
Looking at broader region-wide trends, the East Asia & Pacific region is expected to grow by 7.3 per cent this year; Europe & Central Asia by 2.8 per cent; Latin America & the Caribbean by 3.3 per cent; Middle East & North Africa by 2.5 per cent; South Asia by 5.2 per cent; and Sub-Saharan Africa by 4.9 per cent.
For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will keep growth this year to a modest 1.2 per cent, firming to 2.0 per cent in 2014 and 2.3 percent by 2015. “Economic contraction in the Euro Area is projected to be 0.6 per cent for 2013, compared with the previous projection of 0.1 per cent,” the report said. “Euro Area growth is expected to be a modest 0.9 per cent in 2014 and 1.5 per cent in 2015.”
“While there are markers of hope in the financial sector, the slowdown in the real economy is turning out to be unusually protracted,” Kaushik Basu, Senior Vice President and Chief Economist at the World Bank.
“This is reflected in the stubbornly high unemployment in industrialized nations, with unemployment in the Eurozone actually rising, and in the slowing growth in emerging economies, with India’s annual growth having dropped below 6 percent for the first time in 10 years.”