Developing countries need to steer policies to sustaining growth: World Bank

10:51, June 08, 2011      

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Developing countries are projected to continue their strong growth in 2011-2013, however, they need to shift their policies from crisis-fighting to sustainable growth, said the World Bank on Tuesday.


Growth in the developing economies will continue to outpace the high income countries in the near term, said the Washington-based international financial institution in its June 2011 edition of Global Economic Prospects, an updated report of its forecast in January.

"Globally, GDP is expected to grow 3.2 percent in 2011 before edging up to 3.6 percent in 2012," said Justin Yifu Lin, the World Bank's chief economist and senior vice president for development economics. "But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor."

The World Bank projects that as developing countries reach full capacity, growth will slow from 7.3 percent in 2010 to around 6.3 percent each year from 2011-2013.

In contrast, high-income countries will see growth slow from 2.7 percent in 2010 to 2.2 percent in 2011 before picking up to 2.7 percent and 2.6 percent in 2012 and 2013 respectively.

The 187-member international lender noted that the some unexpected events, including Tsunami and nuclear leak disasters in Japan and the social unrest in the Middle East and North Africa earlier this year, have limited impact on world economy.

"Recent events in Japan and the political turmoil in the Middle East and North Africa have cut sharply into domestic growth, but spillover effects to other economies are expected to be modest," it said.

It forecasted that GDP growth in 2011 will likely be flat in Japan. Among developing Middle-East and North African countries, GDP growth in 2011 will be weakest in Egypt (1 percent) and Tunisia (1.5 percent).

While uncertain, growth in both Egypt and Tunisia is projected to pick up in 2012, reaching close to 5 percent by 2013, according to the report.

Solid growth led by developing-countries is the most likely outcome going forward, Lin added.


Although developing countries remain in a relatively favorable growing position, they are facing new challenges accompanied with it.

"For most developing countries, strong growth has contributed to a new set of global challenges, including higher commodity prices, rising inflation, and the possible return of destabilizing capital inflows as monetary policies tighten and interest rates rise," the World Bank noted.

The report revealed that inflation in developing countries reached almost 7 percent year-on-year in March 2011, more than 3 percentage points higher than the low point in July 2009.

"Developing countries have been resilient despite remaining tensions in high-income countries," said Hans Timmer, director of development prospects at the World Bank. "But many developing economies are operating above capacity and at risk of overheating, most notably in Asia and Latin America."

The bank said that the global financial crisis is no longer the major force dictating the pace of economic activity in developing countries. The majority of developing countries have, or are close to having regained full-capacity activity levels. As a result, country-specific productivity and sectoral factors are now the dominant factors underpinning growth.

High food prices, possible additional oil-price spikes, and lingering post-crisis difficulties in high-income countries pose downside risks for the developing economies.

Besides, slower growth in the high income countries may decrease their demand from the developing economies.

"Activity in high-income and some developing European countries continues to struggle with crisis-related problems, including banking-sector, fiscal and household restructuring," it said.

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Source: Xinhua
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