Washington: Although risks from advanced economies have eased and growth is firming, despite ongoing contraction in the Euro Area, the pick-up in developing countries will be modest because of capacity constraints in several middle income countries, says the World Bank
In its latest Global Economic Prospects (GEP) report, the World Bank said the Global GDP is expected to expand to about 2.2 percent this year and strengthen to 3 percent and 3.3 percent in 2014 and 2015 respectively.
Developing country GDP is now projected to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5. 7 percent in 2014 and 2015, respectively.
Growth in Brazil, India, Russia, South Africa and Turkey has been held back by supply bottlenecks, the report said.
While external risks have eased, growth in these countries is unlikely to reach pre-crisis rates unless supply-side reforms are completed, the Bank said.
"The kind of situation which about a year ago, even nine months ago we were fearing, that there could be a huge downside risk, we don't think that is there.
Diminished risks, but the overall growth prospects also remain diminished.
So, this year's growth, we expect will be slightly--2013 will be slightly less than last year, only slightly," the World Bank Chief Economist, Kaushik Basu told a Press Conference.
This year's growth in developing countries is expected to be slightly more than last year's; growth in industrialised countries this year could be slightly less than last year's, and overall global economy, this year, slightly less than last year, he said.
"We expect a slow pickup from next year in overall growth, which means roughly the kind of analogy you can think of is that inverted plateau", he said.
"We fell into a huge crisis, which happened starting from 2008.
"We are now sort of at the bottom with a slow pickup taking place, and we expect that, from next year, you will see some improvement on the growth, but this year, low growth, low downside risk in terms of the financial markets or otherwise," Basu said.
Responding to questions, Basu said there is volatility in the exchange rate, particularly in developing emerging economy exchange rates.
He said "there is a lot of depreciation going on, and there is concern about the impact of the withdrawal of QE two.
According to the report, 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 percent, firming to 2 percent in 2014 and 2.3 percent by 2015.
"Economic contraction in the Euro Area is projected to be 0.6 percent for 2013, compared with the previous projection of 0.1 percent.
Euro Area growth is expected to be a modest 0.9 percent in 2014 and 1. 5 percent in 2015," it said.
"While there are markers of hope in the financial sector, the slowdown in the real economy is turning out to be unusually protracted," Basu said.
"This is reflected in the stubbornly high unemployment in industrialised 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," he said.
"Also, there is heightened speculation that the US may withdraw QE and widespread concern about its consequences.
"By going into these topical matters, the World Bank's latest Global Economic Prospects alerts us to both the hopes and the risks in the global economy, and also gives valuable instructions on policy," Basu said.