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STORY: WASHINGTON / GLOBAL ECONOMIC PROSPECTS
TRT: 2.55
SOURCE: WORLD BANK
RESTRICTIONS: EMBARGOED UNTIL JUNE 12 AT 7:00 PM EDT
LANGUAGE: ENGLISH / NATS
DATELINE: 12 JUNE 2013, WASHINGTON, DC / FILE
FILE - RECENT - WASHINGTON, DC
1. Wide shot, exterior World Bank
12 JUNE 2013, WASHINGTON, DC
2. Close up, hands
3. SOUNDBITE (English) Andrew Burns, Lead Author of Global Economic Prospects, World Bank Group:
“We see the global economy beginning to strengthen this year and through to 2015. We’ve had a period of very slow growth in high income countries, only 1.2% this year going to strengthen to about 2.3% by the end of the projection period. For the global economy as a whole, that translates into 2.2% growth this year strengthening to 3.3% growth by 2015. Developing countries is much stronger at 5.1% this year growing to about 5.7% at the end of the projection period. While that’s much stronger growth in high income countries, it is significantly slower than what we’ve been accustomed to in the pre-crisis period but we see this slower growth still robust, still strong as something of a “new normal” for developing countries.”
FILE - RECENT - WASHINGTON, DC
4. Close up, World Bank sign
12 JUNE 2013, WASHINGTON, DC
5. SOUNDBITE (English) Andrew Burns, Lead Author of Global Economic Prospects, World Bank Group:
“The risk situation in the world is evolving. In the last couple of years we’ve been focused on risk coming from the high income world ¬¬ possibility of the Euro area crisis, possibility of a situation in the fiscal cliff in the US. Those are very much to the side now and new risks are coming to the fore. We’re talking more about the concerns that the tapering off of quantitative might have for developing countries. What would higher interest rates mean to the strong growth we see in developing countries? What also is happening in commodity markets? Are commodity prices weakening as we see them now? Could that accelerate and will that have impacts for developing countries? By and large, we think developing countries are going to be robust to these changes but nevertheless they are cause for concern and we think the policy makers need to start to shift their focus from the external world more to their domestic preparedness for these more difficult situations going forward.”
FILE - RECENT - WASHINGTON, DC
6. Wide shot, flags
12 JUNE 2013, WASHINGTON, DC
7. SOUNDBITE (English) Andrew Burns, Lead Author of Global Economic Prospects, World Bank Group:
“The growth outlook for the Euro area has been downgraded. We’re looking at about -0.1% in January, currently we’re looking at -0.6%. That’s mainly a reflection of a very weak fourth quarter, weak first quarter numbers that we’ve observed in the Euro area. There are signs of strengthening and that’s expected to see growth move into the positive territory towards the second half of this year and into 2014-2015, but it’s a very muted growth path that were expecting. In some sense, it’s a pessimistic scenario so there is the possibility of an upside. But when we look at the situation in the Euro area over the last several years, it’s been very difficult and there’s been a lot of difficulty, adapting expectations towards a stronger growth and it’s not until that happens that we can expect really a significant improvement in conditions in Europe.”
FILE - RECENT - WASHINGTON, DC
8. Wide shot, interior of World Bank Group building
Risks from advanced economies have eased and growth is firming, despite ongoing contraction in the Euro Area. However, the pick-up in developing countries will be modest because of capacity constraints in several middle income countries, says the World Bank in the newly-released Global Economic Prospects (GEP) report.
Global GDP is expected to expand about 2.2 percent this year and strengthen to 3.0 percent and 3.3 percent in 2014 and 2015.
Developing-country GDP is now projected to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5.7 percent in 2014 and 2015, respectively. Growth in Brazil, India, Russia, South Africa and Turkey has been held back by supply bottlenecks. While external risks have eased, growth in these countries is unlikely to reach pre-crisis rates unless supply-side reforms are completed. In China also, growth has slowed as authorities seek to rebalance the economy.
Looking at broader region-wide trends, the East Asia & Pacific region is expected to grow by 7.3 percent this year; Europe & Central Asia by 2.8 percent; Latin America & the Caribbean by 3.3 percent; Middle East & North Africa by 2.5 percent; South Asia by 5.2 percent; and Sub-Saharan Africa by 4.9 percent.
For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will keep growth this year to a modest 1.2 percent, firming to 2.0 percent in 2014 and 2.3 percent by 2015. Economic contraction in the Euro Area is projected to be 0.6 percent for 2013, compared with the previous projection of 0.1 percent. Euro Area growth is expected to be a modest 0.9 percent in 2014 and 1.5 percent in 2015.
Global trade, after contracting for several months, is expanding once again, but trade is expected to expand only 4.0 percent in 2013, well off the pre-crisis pace of 7.3 percent. Not only will the volume of trade grow less quickly than in the past, the value of trade will grow even less quickly as commodity prices begin to ease in response to rapidly increasing supply. The prices of metals and minerals are already down by 30 percent and that of energy by 14 percent since their peaks in early 2011.
Part of the resilience of global trade, despite the weakness in high-income economies, has been due to rapid expansion in South-South trade. More than 50 percent of developing country exports now go to other developing countries. Even when China is excluded, South-South trade has been growing at an average rate of 17.5 percent a year over the past decade, with manufacturing trade expanding as rapidly as commodities trade.
Gross capital flows to developing countries, which were relatively weak for most of the post-crisis period, have reached record levels. International bond issuance by developing countries is also at record levels, while bank lending and equity issuance for developing countries is up by almost 70 percent as compared with first 5 months of 2012. The rebound in bank-lending suggests that for developing countries the most acute effects of high-income banking-sector deleveraging have passed. Despite the uptick, as a percent of developing-country GDP, capital flows remain well below pre-crisis levels.
Prospects for developing countries are varied. In several developing countries, notably in East Asia & the Pacific, demand appears to be expanding faster than supply, resulting in growing imbalances, such as inflation, asset-price bubbles, rising debt levels and deteriorating current account balances. Most countries in Sub-Saharan Africa are also running at or close to full capacity, risking a build-up of inflationary pressures. In developing Europe, although activity has picked up, growth has not been fast enough to quickly reduce post-crisis output gaps and unemployment. Finally, in the Middle East & North Africa, GDP growth has been disrupted by political and social tensions. Unemployment and slow productivity remain central policy challenges.
