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Global growth still driven by developing economies -- World Bank
Developing economies continue to be the main driver of global growth four years after the financial crisis, but their output has slowed compared with the pre-crisis period, according to the World Bank’s ‘Global Economic Prospects’ report issued this month.
To regain pre-crisis growth rates, developing countries must once again emphasise internal productivity-enhancing policies, it states.
“While headwinds from restructuring and fiscal consolidation will persist in high-income countries, they should become less intense allowing for a slow acceleration in growth over the next several years.”
Financial market conditions have improved dramatically since June, which is encouraging, but other signals are more mixed.
Growth in developing countries accelerated in the third quarter of 2012, including in Brazil and China and early indications for the fourth quarter point to a continued acceleration in East Asia and the Pacific, Europe and Central Asia and South Asia; but slowing in Latin America and the Caribbean.
Among the high income countries, investment and industrial activity in the US show unusual weakness, the World Bank states. This is apparently due to uncertainty over the stance of fiscal policy in the run up to November’s elections and the end of 2012 fiscal cliff.
The economy appears to be contracting in Japan, in part because of political tension with China and in Europe, the economy appears to have weakened again in the fourth quarter, perhaps reflecting weak demand for capital goods from the US and Japan.
The report says that overall the global economic environment “remains fragile” although the balance of risks is less skewed to the downside than it has been in recent years.
It predicts global growth of 2.3 to 2.4pc in 2012 and 2013, respectively, gradually strengthening to 3.1 and 3.3pc in 2014 and 2015.