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World Bank: Global economy to grow modestly in 2014

global economy


by Joseph Earnest  January 16, 2014


Newscast Media WASHINGTON—The world economy is projected to grow 3.2 percent in 2014, up from 2.4 percent in 2013, with growth supported by recovery from the global economic crisis in high-income countries and picking up in developing countries, the World Bank reports.

The prospect of growth from 2014 through 2016, however, is tempered by a tapering of the U.S. monetary stimulus and by structural shifts taking place in China's economy, according to the bank's Global Economic Prospects report, released January 14.

The bank projects that growth in high-income countries will be a modest 2.2 percent in 2014 and will increase to 2.4 percent in both 2015 and 2016.

"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months to come," said World Bank President Jim Yong Kim. "To accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems and shore up social safety nets," he added.

The report states that global growth is expected to increase slightly to 3.4 percent in 2015 and 3.5 percent in 2016. That slow rate of growth is not cause for concern, the bank says, because it "reflects a cooling off of the unsustainable turbo-charged pre-crisis growth."

The report states that growth in developing countries is strengthening and is expected to be 5.3 percent in 2014 and edge up to 5.5 percent in 2015 and 5.7 percent in 2016. By region, the bank projects growth to be strongest in East Asia and the Pacific, at 7.2 percent in 2014 and 7.1 percent in each of the following two years. Growth in South Asia is recovering and is projected to accelerate from 5.7 percent in 2014 to 6.7 percent in 2015 and 2016.

In sub-Saharan Africa, growth is expected to firm at 5.3 percent in 2014 and rise to 5.5 percent in 2016, bolstered by strong investment in the natural resources and infrastructure sectors.

In the Middle East and North Africa, growth is projected to be 2.8 percent in 2014 and 3.6 percent in 2016, held back by social and political tensions. The growth "will not be robust enough to cut significantly into underlying unemployment and spare capacity," according to the report.

Growth in Europe and Central Asia will be 3.5 percent in 2014 and slowly rise to 3.8 percent in 2016. Latin America and the Caribbean growth is projected to be below that, at 2.9 percent in 2014, but is expected to strengthen to 3.7 percent in 2016.

In the report, the bank states that 2014 will experience a pickup in global trade, fueled largely by more investment and consumer demand in high-income countries. However, the growth in trade will be moderated by persisting lower prices of energy, metals and minerals, and food. The bank predicts that global interest rates are likely to rise slowly, reaching 3.6 percent by the middle of 2016. It states that if markets push up long-term rates more quickly, investment flows to developing countries could weaken.

However, it says that "by improving the longer-term outlook, credible reform agendas can go a long way towards boosting investor and market confidence."

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