The World Bank says that the worst of the global financial crisis is over but it still expects global economic growth to remain flat in 2013 in its latest Global Economic Prospects report.
The World Bank estimates that the global economy grew by 2.3 per cent in 2012, down from its prediction made in June 2012 of 2.5 per cent and it expects 2.4 per cent growth in 2013.
It expects global economic growth to rise to 3.1 per cent in 2014 and 3.3 per cent in 2015.
However, the World Bank report draws a distinction between growth in high income countries and growth in developing economies and the relationship between the two.
It says that high income economies grew by just 1.3 per cent in 2012 and will grow by the same amount in 2013. This has an impact on the growth rates of emerging economies and has led to them recording some of the lowest rates of the last decade in 2012, down to 5.1 per cent.
It says high income western economies can expect to struggle again this year and warns emerging economies that they need to improve the pace of productivity.
The report warns that weakness in the Eurozone led to capital flows into developing economies falling by 30 per cent in the second quarter of 2012. It says that though this has recovered to some degree as investment has risen, the weakness in developed economies is holding back emerging economies from reaching the levels of growth they saw before the financial crisis.
The report says that growth will still be available for emerging economies, albeit at a slower pace, but “developing countries will need to focus on productivity-enhancing domestic policies, to assure robust growth in the long term.”
World Bank Group President Jim Yong Kim said: “The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth.
“Developing countries have remained remarkably resilient this far but we can’t wait for a return to growth in high-income countries. So we have to continue to support developing countries in making investments in infrastructure, in health, in education. Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak.”
Mr Kim said that the main downside risks to the economy remain debt and fiscal issues in the Eurozone and the United States. He said that a slowdown in growth in China and a disruption in oil supplies remain a threat, though less so than this time last year.
Hans Timmer, a director of the World Bank’s Development Prospects Group said: “The weakness in high income countries is dampening developing-country growth, but strong domestic demand and growing South-South economic linkages have underpinned developing country resilience – to the point that, for the second year in a row, developing countries were responsible for more than half of global growth in 2012.”
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