World Bank lowers growth forecast for developing countries to 4.8%

PTI Washington | Updated on March 12, 2018 Published on June 11, 2014

World Bank Group President Jim Yong Kim (right)

Global economy predicted to expand by 2.8% in 2014

Developing countries are headed for a year of disappointing growth, the World Bank said in its Global Economic Prospects (GEP) report, which has lowered its forecasts for developing countries to 4.8 per cent growth rate this year from the January estimate of 5.3 percent.

In its latest report, the Bank has lowered its forecasts for developing countries, now eying growth at 4.8 per cent this year, down from its January estimate of 5.3 per cent.

Signs point to strengthening in 2015 and 2016 to 5.4 and 5.5 per cent, respectively.

China is expected to grow by 7.6 per cent this year, but this will depend on the success of rebalancing efforts. If a hard landing occurs, the reverberations across Asia would be widely felt, the Bank said.

“Growth rates in the developing world remain far too modest to create the kind of jobs we need to improve the lives of the poorest 40 per cent,” said World Bank Group President Jim Yong Kim.

“Clearly, countries need to move faster and invest more in domestic structural reforms to get broad-based economic growth to levels needed to end extreme poverty in our generation,” Kim said.

Growth predictions for global economy

The global economy, it said, is expected to pick up speed as the year progresses and is projected to expand by 2.8 per cent this year, strengthening to 3.4 and 3.5 per cent in 2015 and 2016, respectively.

High-income economies will contribute about half of global growth in 2015 and 2016, compared with less than 40 per cent in 2013, it added.

Kaushik Basu, Senior Vice President and Chief Economist at the World Bank said the financial health of economies has improved.

“With the exception of China and Russia, stock markets have done well in emerging economies, notably, India and Indonesia. But we are not totally out of the woods yet,” he said.

“A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis,” Basu said.

Decline in growth figures

In a conference call with reporters, Andrew Burns, lead author of the World Bank report and the head of the team in the Macro Group told reporters the forecast has been revised downwards relatively substantially.

“So, for global growth, we’re calling for 2.8 per cent growth now. It was 3.2 per cent in January. High-income countries marked down from 2.2 to 1.9 per cent, and developing country growth marked down from 5.3 to 4.8 per cent,” he said.

On the debt-to-GDP ratios, he said, there are a number of economies – including Ghana, South Africa, Kenya and Malaysia, arguably India, where the Bank feels that monetary – or fiscal policy, rather, remains quite expansionary where debt-to-GDP ratios have been rising and where this recommendation for some tightening in policy going forward seems to be particularly relevant.

“In the case of Brazil, Brazil is a country like Turkey, like India, which has, over the past couple of years, had disappointing growth, in part, we think, because of the strength of the rebound in the immediate post-crisis period that reopened positive output gaps, generated domestic imbalances, that really force growth to slow down in order to remove those imbalances, and I’m talking inflation, high current account deficits in that regard,” Burns said.

Published on June 11, 2014

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.