World Bank lowers global growth estimate

The World Bank has lowered its growth estimate for the global economy in 2013, but said that expansion appeared more stable than just before the 2008 financial crisis.

The global economy was expected to grow at an annual rate of 2.2 percent this year, led by a 5.1 percent surge in developing countries, down from a January estimate of a 2.4 percent.

“The overall acceleration is not stronger because the majority of developing countries have more or less fully recovered from the 2008 financial crisis,” the report said.

Kaushik Basu, the World Bank’s chief economist, said the estimates are “actually somewhat similar to what we were saying about six months ago”.

“In a turbulent global economy, that is good news, when you have two periods without any big shifts and changes,” he said.

Growth in high-income countries was notably dampened by the eurozone debt crisis.

Unsurprisingly, the sharpest downward revision was for the 17-nation bloc, where a contraction of 0.6 percent was seen, down from the prior estimate  of a 0.1 percent dip.

“The challenges are especially difficult in high-income Europe, where growth is being held back by weak confidence and continued banking sector and fiscal restructuring,” the report said.

Collateral damage

“Collateral damage” from the eurozone crisis continued to be felt in the Middle East and North Africa region, one of the eurozone’s most important trade partners.

The MENA economies, projected to grow 2.5 percent, were still feeling the impact of political and social tensions from the Arab Awakening, though there were signs of improvement in Tunisia and Morocco, bank experts said.

Sub-Saharan Africa should do better this year, with growth accelerating to 4.9 percent from 4.4 percent in 2012, supported by “robust domestic demand factors” and increased money flows from workers abroad.

Commodity prices, whose surge had destabilised the global economy, “are beginning to move down”, Basu said. But, he cautioned, the price declines would put pressure on incomes in the commodity-exporting nations and regions.

Overall, the World Bank said that economic risks appeared to be diminishing and growth was more stable than in the build-up to the US-centered 2008 financial crisis that pitched the global economy into recession.

“We are moving towards a less volatile period where growth is going to be slower but less subject to strong fluctuations, especially those coming from the high-income world that we’ve observed in the previous years,” Andrew Burns, co-author of the report, said.

Burns noted the robust growth in the pre-crisis period was due to the financial “bubble” and that now growth was more in line with the underlying capacity in developing countries.

“This a case of moving towards the new normal of the post-crisis,” he said.