Chief says poor countries cannot rely on high-income nations to drag them along
The World Bank has warned developing countries that they would need to be able to cope with a weak recovery in the west as it predicted a tentative and uneven recovery from the financial crisis of four years ago.
Highlighting the risks from a relapse in the euro area and from the political in-fighting in the US over the budget, the bank said poor countries needed to build up their economic strength because they could not rely on high-income countries to drag them along.
"The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust growth", said World Bank president, Jim Yong Kim. "Developing countries have remained remarkably resilient thus far. But we can't wait for a return to growth in the high income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the scene for the stronger growth that we know they can achieve in the future."
The bank said that more than four years after the collapse of Lehman Brothers in September 2008 triggered the worst global economic downturn of the post-war era, the world economy continued to struggle. Developing countries had seen their growth rates fall, although they were still expanding more quickly than high-income countries, where activity had been dampened by the crisis in the eurozone and by the uncertainty caused by the threat of the US falling off the "fiscal cliff".
In its annual Global Economic Prospects, the Bank said upside and downside risks to its forecasts were more balanced than a year ago, and there was a smaller chance of the downside risks materialising. The report said rich countries were still coping with the after effects of the slump and the need to deal with big budget deficits but that the outlook was for a gradual recovery.
"While headwinds from restructuring and fiscal consolidation will persist in high-income countries, these should become less intense allowing for a slow acceleration in growth over the next several years."
For high income countries, the Bank said growth was again projected to be a "mediocre" 1.3% in 2013, but rising to 2% in 2014 and 2.3% in 2015. A further year of falling output is forecast for the eurozone, with growth of just 0.9% in 2014.
"Although the likelihood of a serious crisis of confidence in the euro area that would lead to a bloc-wide freezing up of financial markets has declined significantly, continued progress is needed to improve country-level finances, and enact plans to reinforce pan-European schemes for a banking union and sovereign rescue funds."
The bank said that if the euro area failed to maintain the momentum for reform, some of the more vulnerable members could be frozen out of capital markets.
"In the US, solid progress towards outlining a credible medium-term fiscal consolidation plan that avoids periodic episodes of brinkmanship surrounding the debt ceiling, is needed. Policy uncertainty has already dampened growth. Should policymakers fail to agree such measures, a loss of confidence in the currency and an overall increase in market tensions could reduce US and global growth by 2.3% and 1.4% respectively."
The report said many of the poorest countries of Africa continued to grow rapidly. Excluding South Africa, the region's largest economy, GDP output expanded by 5.8% in 2012, with a third of countries in the region growing by at least 6%.
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Guardian