The World Bank came up with a positive outlook for global economic growth raising its expectation for GDP growth in 2014 to 3.2 per cent from its estimate of 2.4 per cent growth in 2013. It added, however, that even as the pace of growth in developing countries would be higher than the global average, it would rise less compared with previous forecasts.
“Five years after the global financial crisis, the world economy is showing signs of bouncing back this year, pulled along by a recovery in high-income economies. Developing-country growth is also firming, thanks in part to the recovery in high-income economies as well as moderating, but still strong, growth in China,” according to World Bank’s latest Global Economic Prospects report.
It cautioned that growth prospects for 2014 are sensitive to the tapering of monetary stimulus in the US, which began earlier this month, and to the structural shifts taking place in China’s economy.
The report said that growth in South Asia expanded a modest 4.6 per cent in 2013, reflecting weakness in India amid high inflation besides current account and budget deficits. More recently, regional exports have recovered, because of strengthening external demand and the earlier depreciation of the Indian rupee, it pointed out.
Growth in the South Asia region is projected to improve to 5.7 per cent in 2014, rising to 6.7 per cent in 2016, led mainly by recovering import demand by high-income economies and regional investment. The projected pickup, however, will depend on macroeconomic stability, sustained policy reforms, and progress in reducing supply side constraints, it said.
The report forecasts growth in developing countries to pick up from 4.8 per cent in 2013 to a slower than previously expected 5.3 per cent this year, 5.5 per cent in 2015 and 5.7 per cent in 2016. While the pace is slower than the boom period of 2003-07, the slower growth is not a cause for concern. Almost all of the difference reflects a cooling off of the unsustainable turbo-charged pre-crisis growth, with very little due to an easing of growth potential in developing countries.
“We expect developing country growth to rise above 5 per cent in 2014, with some countries doing considerably better, with Angola at 8 per cent, China 7.7 per cent, and India at 6.2 per cent. But it is important to avoid policy stasis so that the green shoots don't turn into brown stubble,” said Kaushik Basu, Senior Vice President and Chief Economist at the World Bank. The World Bank said India’s growth is projected to increase to 7.1 per cent by 2016-17.
Indian GDP is expected to rise at one of its slowest pace in a decade during the current fiscal ending March 31, 2014. The outlook for the next two years reflects expectations that the slowdown has bottomed out.
Meanwhile, World Bank expects that the drag on growth from fiscal consolidation and policy uncertainty for high-income countries will continue to ease, accelerating economic growth from 1.3 per cent in 2013 to 2.2 per cent this year, stabilising at 2.4 per cent for each of 2015 and 2016.
Amongst high-income economies, the recovery is most advanced in the US, with GDP expanding for 10 quarters now. The US economy is projected to grow by 2.8 per cent this year (from 1.8 per cent in 2013), firming to 2.9 and 3 per cent in 2015 and 2016, respectively. Growth in the Euro Area, after two years of contraction, is projected to be 1.1 per cent this year, and 1.4 and 1.5 per cent in 2015 and 2016, respectively, the report noted.
Global GDP is projected to grow from 2.4 per cent in 2013 to 3.2 per cent this year, stabilizing at 3.4 per cent and 3.5 per cent in 2015 and 2016, respectively, with much of the initial acceleration reflecting a pick-up in high-income economies.
(Edited by Joby Puthuparampil Johnson)