World Bank urges poor countries to boost growth as West struggles
THE World Bank has warned developing countries that they would need to be able to cope with a weak recovery in the West as it predicted a tentative and uneven recovery from the financial crisis of four years ago.
Highlighting the risks from a relapse in the euro area and from the political infighting in the US over the budget, the bank said poor countries needed to build up their economic strength because they could not rely on high-income countries to drag them along.
"The economic recovery remains fragile and uncertain," said World Bank 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. This will set the scene for the stronger growth in the future."
The bank said that more than four years after the collapse of Lehman Brothers in September 2008 triggered the worst global economic downturn of the postwar era, the world economy continued to struggle. In its annual Global Economic Prospects, the bank said: "While headwinds from restructuring and fiscal consolidation will persist in high-income countries, these should become less intense allowing for a slow acceleration in growth."
For high income countries, the bank said growth was again projected to be a "mediocre" 1.3 per cent in 2013, but rising to 2 per cent in 2014 and 2.3 per cent in 2015. A further year of falling output is forecast for the eurozone, with growth of just 0.9 per cent in 2014.
The bank said that if the euro area failed to maintain the momentum for reform, some of the more vulnerable members could be frozen out of capital markets.
"In the US, progress towards outlining a credible medium-term fiscal consolidation plan that avoids episodes of brinkmanship surrounding the debt ceiling, is needed."
The report said many of the poorest countries of Africa continued to grow rapidly. Excluding South Africa, the region's largest economy, GDP output expanded by 5.8 per cent in 2012, with a third of countries in the region growing by at least 6 per cent.