World Bank urges poor countries to boost growth as West struggles
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.
Frequently Asked Questions about this Article…
The World Bank warned that the recovery in high‑income countries is tentative and uneven, so developing countries need to be able to cope with a weak recovery in the West rather than rely on rich countries to drive growth for them.
The World Bank’s message matters to investors because slow or fragile growth in high‑income economies can limit export demand, capital flows and market sentiment for emerging markets. The bank recommends stronger domestic investment in infrastructure, health and education to support more resilient, long‑term growth.
The World Bank advised developing countries to invest in infrastructure, health and education, saying these investments will help set the scene for stronger future growth and reduce dependence on high‑income economies.
The bank highlighted a risk of relapse in the euro area and warned that if the eurozone fails to maintain reform momentum some of the more vulnerable member countries could be frozen out of capital markets, which would hurt global and regional growth.
The World Bank pointed to political infighting in the US over the budget and said progress on a credible medium‑term fiscal consolidation plan is needed to avoid episodes of brinkmanship around the debt ceiling that could harm confidence and growth.
In its Global Economic Prospects report, the World Bank projected 'mediocre' growth of 1.3% in high‑income countries for 2013, rising to 2% in 2014 and 2.3% in 2015.
The report forecast another year of falling output for the eurozone, with growth of just 0.9% in 2014, underlining the region’s weak near‑term outlook unless reform momentum improves.
The World Bank said many of the poorest African countries continued to grow rapidly: excluding South Africa, the region’s GDP expanded by 5.8% in 2012 and about one‑third of countries grew by at least 6%. For investors, that highlights pockets of stronger growth in Africa despite broader global headwinds.
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